“Drill, Baby, Drill”: Will It Work?

During the Republican National Convention of 2008, the slogan “Drill, Baby, Drill” showed how far the oil industry had managed to dictate to a major political party. The commercial purpose is obvious. Big Oil wants less government regulation, hence a free hand to make more money. Two years later, the BP oil spill off the Louisiana coast brought home the dangers of drilling despite all the necessary precautions.

While Big Oil wants ever-increasing profits, the public wants cheaper prices, independence from foreign oil, and a clean environment, too. Can these goals be achieved by more drilling? One side says yes because of the money involved. However, the people must look deeper because they don’t share the oil profits. Their energy future and quality of life are at stake.

The first question should be: How much oil reserve does the US have? The US ranks 12th worldwide with 30.9 billion barrels in oil reserves according to the BP Statistical Review of World Energy 2011. This accounts for only 2.2 % of global oil reserves. It confirms the fact that the US has no ability to influence oil prices despite being the only superpower in the world.

As for production, the US ranks third with 7.5 million barrels per day in 2010 behind Saudi Arabia (10.2 mbd) and Russia (10.0 mbd). Although the US accounts for 8.7% of world oil production, it still has no say in oil prices. Why? It consumes 19 mbd that necessitates imports from foreign countries to supplement domestic supply. No wonder the US is hostage to foreign oil due to its huge appetite. Granted that it can ramp up production to exceed Saudi Arabia’s 10.2 mbd, the US still has a long way to go to achieve independence from foreign oil.

Statistics aside, we must understand the nature of the oil industry and the concentration of oil reserves. In the top oil fields around the world, you drill and find a “sea” of oil underneath. A sea of oil is like a savings bank where you adjust the tap and control the flow on a daily basis. This is why Saudi Arabia is so influential in controlling oil prices. In the US, only a few “lakes” of oil are found in Alaska, the Gulf coast, and possibly the coasts off California and Georgia. Elsewhere, the reserves are less than lake size spread all over the country. The oil industry is very capital intensive that requires economies of scale to operate. To produce at competitive prices, it needs to have large refineries located near large reserves, and infrastructure such as pipelines or container ports for distribution. You may find a small pool of oil underneath your home but it is not economical to extract, refine and distribute. Simply put, the US is not endowed with large seas of oil reserves, but only lakes and lots of pools instead.

What the oil companies want is a free hand to drill existing lakes of oil in Alaska and along the coastline where the Federal Government has imposed strict environmental conditions. They also want a free hand to do horizontal drilling (known as fracking) to widen the permitted drilling area, which may incur environmental damage especially to the underground water tables. Due to limited reserves, US oil companies have no ability to help secure America’s independence from foreign oil even if they are allowed to drill everywhere. It follows that they cannot help lower oil prices either. On the contrary, they welcome higher prices for the resultant profits, and can easily put the blame on OPEC and the US government for the environmental regulations. They also want the public to ignore environmental dangers by trumpeting the illusion of lower oil prices and foreign independence with more drilling.

What to do then? If you cannot produce more oil due to natural limited reserves, you have to consume less. If you cannot consume less, you need to find a plausible alternative. The US has invaded Iraq by drumming up Saddam Hussein’s weapons of mass destruction. It has incurred heavy losses in the Iraq war. The military alternative has proved implausible.

If there is a lesson to be learned, the US must turn to its plentiful soft power and creativity. That is, the employment of modern technologies as an alternative to oil. The technologies are already here awaiting mass adoption, except for the lack of political will. Existing technologies include: bio-fuels; compressed or liquefied natural gas (CNG or LNG); plug-in hybrids; hydrogen fuel cells; and most dramatic of all, replacing the gasoline engine with the electric motor to be recharged with electricity generated by alternative fuels. The switch to non-oil alternatives could have proceeded much faster without the roadblocks and political lobby set up by the powerful oil industry, which, given all its talents, will take a long time to grasp the meaning of depleting oil reserves and increasing environmental dangers.

(March 2012)

This entry was posted in 21st Century, Economics/Politics, Environment. Bookmark the permalink.

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