NoaIzumiCrude Reasoning
March 3rd 2009 13:19
Looks like we haven’t heard the last word on the stimulus yet. The Investor’s Business Daily has still more two cents to put in, this time to try to make the case for offshore drilling.
Crude Stimulus
IBD gives two reasons for more offshore drilling: income and energy security. Two excellent reasons, if they’re true.
According to the piece, over $8 trillion in new GDP and over 1 million new jobs would be created if we opened all of our coast to offshore drilling. What needs to be remembered about that proposal, however, is that we already drill in the most productive areas, off Alaska and the Gulf Coast. So, the additional oil production from the other coastal areas would be small, about 200,000 barrels a day (total current US production is about 8 million barrels a day). Additional natural gas production would be proportionally slightly higher, about 600 billion cubic feet (compared to US production of 19 trillion cubic feet per year).
Really Long Link
Really Long Link
Assuming oil would go for $150/barrel and natural gas would go for $15/thousand cubic feet (both high estimates), that additional oil would be worth $10.1 billion per year and the natural gas would be worth $9 billion/year. Supposing for the sake of argument that the EIA estimates are off by a hundred percent, you’d have a total haul just shy of $40 billion a year from the additional drilling. Assuming that every dollar in oil and gas becomes two dollars in additional GDP once it’s worked its way through the economy (another high estimate), this country will have that additional $8.2 trillion added to its GDP in no time: a little over a century. The article’s estimate of $70 billion in additional wages every year seems a bit off as well.
As for energy security, they say that every little bit helps, and this would be a little bit. The United States uses over 20 million barrels of oil every day, of which over 13 million is imported. 1.5 million barrels a day come from Saudi Arabia alone, and over a million come from Venezuela.
Really Long Link
The picture’s a little better for natural gas, of which we import 3.9 trillion cubic feet per year. The additional drilling would yield enough to offset about 15% of that. But, since imports meet less than a fifth of the demand for natural gas in this country, the rest being met by domestic sources, how important is cutting that down, really? Oil is the big vulnerability, and offshore drilling will barely make a dime’s worth of difference to that.
Really Long Link (PDF file)
Lastly, IBD touts the “shovel-readiness” of oil-drilling (for which it offers no evidence), but shovel-readiness of what? Any oil or gas wouldn’t start flowing for ten years after we started, so we’re not talking about immediate drilling, or even immediate building of oil rigs. At best, it’s immediate oil exploration, something not exactly known for creating new jobs. More oil may spur the construction of new refineries, but given the amount of product, that’s likely to be minimal as well.
Besides, isn’t construction supposed one of those areas where new employment doesn’t count, because all construction jobs are “temporary”?
Like I’ve said before, it may be worth doing anyway. But opening up more coastline to drilling is nowhere near the cure-all, or the cure-lots, that the folks at IBD have always made it out to be.
Crude Stimulus
IBD gives two reasons for more offshore drilling: income and energy security. Two excellent reasons, if they’re true.
According to the piece, over $8 trillion in new GDP and over 1 million new jobs would be created if we opened all of our coast to offshore drilling. What needs to be remembered about that proposal, however, is that we already drill in the most productive areas, off Alaska and the Gulf Coast. So, the additional oil production from the other coastal areas would be small, about 200,000 barrels a day (total current US production is about 8 million barrels a day). Additional natural gas production would be proportionally slightly higher, about 600 billion cubic feet (compared to US production of 19 trillion cubic feet per year).
Really Long Link
Really Long Link
Assuming oil would go for $150/barrel and natural gas would go for $15/thousand cubic feet (both high estimates), that additional oil would be worth $10.1 billion per year and the natural gas would be worth $9 billion/year. Supposing for the sake of argument that the EIA estimates are off by a hundred percent, you’d have a total haul just shy of $40 billion a year from the additional drilling. Assuming that every dollar in oil and gas becomes two dollars in additional GDP once it’s worked its way through the economy (another high estimate), this country will have that additional $8.2 trillion added to its GDP in no time: a little over a century. The article’s estimate of $70 billion in additional wages every year seems a bit off as well.
As for energy security, they say that every little bit helps, and this would be a little bit. The United States uses over 20 million barrels of oil every day, of which over 13 million is imported. 1.5 million barrels a day come from Saudi Arabia alone, and over a million come from Venezuela.
Really Long Link
The picture’s a little better for natural gas, of which we import 3.9 trillion cubic feet per year. The additional drilling would yield enough to offset about 15% of that. But, since imports meet less than a fifth of the demand for natural gas in this country, the rest being met by domestic sources, how important is cutting that down, really? Oil is the big vulnerability, and offshore drilling will barely make a dime’s worth of difference to that.
Really Long Link (PDF file)
Lastly, IBD touts the “shovel-readiness” of oil-drilling (for which it offers no evidence), but shovel-readiness of what? Any oil or gas wouldn’t start flowing for ten years after we started, so we’re not talking about immediate drilling, or even immediate building of oil rigs. At best, it’s immediate oil exploration, something not exactly known for creating new jobs. More oil may spur the construction of new refineries, but given the amount of product, that’s likely to be minimal as well.
Besides, isn’t construction supposed one of those areas where new employment doesn’t count, because all construction jobs are “temporary”?
Like I’ve said before, it may be worth doing anyway. But opening up more coastline to drilling is nowhere near the cure-all, or the cure-lots, that the folks at IBD have always made it out to be.
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