http://www.nytimes.com/2005/03/25/opinion/25deffeyes.htmlPRESIDENT BUSH'S hopes for the Arctic National Wildlife Refuge came one step closer to reality last week. While Congress must still pass a law to allow drilling in the refuge, the Senate voted to include oil revenues from such drilling in the budget, making eventual approval of the president's plan more likely.
Yet the debate over drilling in the Arctic refuge has been oddly beside the point. In fact, it may be distracting us from a far more important problem: a looming world oil shortage.
The environmental argument over drilling in the refuge has often been portrayed as "tree huggers" versus "dirty drillers" (although, as a matter of fact, the north coastal plain of Alaska happens to have no trees to hug). Even as we concede that this is an oversimplification, we should also ask how a successful drilling operation would affect American oil production.
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Despite its size, Prudhoe Bay was not big enough to reverse the decline of American oil production. The greatest year of United States production was 1970. Prudhoe Bay started producing oil in 1977, but never enough to raise American production above the level of 1970. The Arctic refuge will probably have an even smaller effect. Every little bit helps, but even the most successful drilling project at the Arctic refuge would be only a little bit.
But if the question of whether to drill in the Arctic National Wildlife Refuge is the wrong one, what's the right one? In 1997 and 1998, a few petroleum geologists began examining world oil production using the methods that M. King Hubbert used in predicting in 1956 that United States oil production would peak during the early 1970's. These geologists indicated that world oil output would reach its apex in this decade - some 30 to 40 years after the peak in American oil production. Almost no one paid attention.
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The View from the Summit of Hubbert's Peakhttp://www.prudentbear.com/archive_comm_article.asp?category=International+Perspective&content_idx=41380snip>
In response to the most recent surge in oil prices, President Bush has called for increased energy conservation (interestingly enough, a stance that was disparaged by his Vice President just 2 years earlier when he was eagerly pressing the case for war in Iraq), as well as using America’s increasing reliance on imported oil (from increasingly unstable regimes) as justification for increased drilling in the Arctic National Wildlife Refuge, on Alaska’s North Slope. The Prudhoe Bay oil field, one of the world’s biggest reservoirs, is just sixty miles west of the refuge. Surveys carried out by the U.S. Geological Survey suggest that anwr may contain about ten billion barrels of recoverable oil.
Even if this estimate turns out to be reliable, and if exploration starts next year (highly questionable given ongoing Congressional opposition), in 2025 anwr could be generating about a million barrels of oil a day. This is a lot of fuel, but it dwindles next to domestic American energy requirements. By 2025, according to the Department of Energy, Americans will be consuming almost thirty million barrels a day. With luck, an anwr oil field operating at full capacity could satisfy perhaps three or four per cent of that total, meaning that the country would still remain heavily reliant on oil imports at a time of rapidly growing depletion abroad, melding with rapidly increasing demand. Consider the following: The average American consumes 25 barrels of oil a year. In China, the average is about 1.3 barrels per year; in India, less than one. So as some 2.5 billion Chinese and Indians move to improve their living standards, their demand for energy is likely to become similarly insatiable with all that this implies for prices in the energy complex.
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In April, 2003, just weeks after the invasion of Iraq, Vice-President Cheney echoed many Wall Street predictions that by the end of the year Iraq would be able to raise its oil output as much as fifty per cent over prewar levels. Before the war, the Iraqi National Oil Company was pumping about two and a half million barrels a day. Now, with the help of money, personnel, and equipment provided by the American government, it is pumping about 1.8 million barrels a day—at least, on those days when insurgent attacks on pipelines and storage facilities don’t force a cut in production.
The perception long fostered by the IEA has been that supply has continually exceeded demand. It has made the behaviour of prices since March, 1999 hard to understand. By contrast, the work of oil consultants Groppe, Long, & Littell, Matt Simmons and Colin Campbell have consistently constructed their supply/demand data by tracking the physical flow of oil, rather than relying on the politically doctored numbers furnished by the members of OPEC. Using this method has made today’s high oil prices far easier to understand, particularly in light of the persistent evidence suggesting widespread overproduction of OPEC members in regard to their respective quotas.
The evidence, however, is becoming irrefutable and the IEA is finally sounding the alarm: “The reality is that oil consumption has caught up with installed crude and refining capacity," the Paris-based agency said. "If supply continues to struggle to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives”. It states in its World Energy Outlook 2004 that $3 trillion will need to be invested in new oil production capacity to offset future production declines and meet demand growth to 2030.
One can, therefore, fully understand the beginnings of what appears a full-blown panic on the part of the IEA. The nightmare scenario that their analysis only hints at has been sketched out vividly by oil analyst Jan Lundberg, who recently laid out the following scenario in (appropriately enough), Electric Vehicle (EV) Magazine:
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