D e s e r t E x p o s u r e
August
2008
Editor's Note
Page: 2Before we invaded Iraq, it's worth remembering, the price of oil was about $30 a barrel. If you don't think there's a connection between more than five years of war and deficits and today's $125 price tag, you need a refresher on Econ 101. (The war has also directly crimped the world's oil supply, with Iraqi oil production stuck at about 2.2 million barrels a day, well below its potential output.)
We can control only one of the two other chief causes of the price runup — our own gluttonous oil consumption, which gulps roughly a quarter of the world's oil to supply four percent of earth's population. The other driver of prices is the continuing industrialization and modernization of nations such as India and China. Having seen the lifestyle Americans enjoy, not surprisingly the rest of the world wants to emulate us. Unfortunately, there's simply not enough oil to make that possible: If China, with more than 1.3 billion people, consumed oil at the US' current per-capita rate, it would slurp up all the world's production and still be 8.3 million barrels a day short.
(Happily for those of us in Southwest New Mexico, there's an upside to the boom in the world's developing economies: Copper, like petroleum, is in increasing demand. The resultant rise in copper prices has led to mining employment and makes it profitable to exploit previously uneconomical supplies.)
Given the challenges on the demand side, what can be done to increase oil production? This energy question has recently taken center stage in the campaign to replace Domenici, between Rep. Steve Pearce and Rep. Tom Udall. On his Web site, Pearce argues, "Gas prices and home energy costs are breaking the family budget and we are increasingly looking to foreign sources of energy to meet demand. I believe we can reverse both of these trends by increasing America's domestic supply of energy. Increased supply will mean lower prices and less dependence on volatile regions of the world like the Middle East."
Pearce, alone among New Mexico's congressional delegation, voted against increasing CAFE requirements in 2007. Donors from the oil and gas industry have given more than $200,000 to Pearce's campaign to date, more than three times those from any other industry. (Oil and gas donors don't even make the top 20 industries backing Udall.) The League of Conservation Voters recently named Pearce to its "Dirty Dozen" list of most environmentally unfriendly congressmen. But you'd like to think that Pearce, who built an enormously successful business servicing oil wells, would at least know something about the future of oil production.
Unfortunately, in pinning America's hopes on increased domestic oil production while shunning higher fuel economy rules, Pearce is playing politics. If he doesn't know better, he should.
The facts are these: Regardless of the merits and environmental risks of expanding US drilling, the benefits to our oil supply would be minuscule and years away. According to a recent study by the federal government's Energy Information Administration, under the most optimistic scenario opening the Alaska National Wildlife Refuge (ANWR) to drilling would reduce oil prices by only $1.44 a barrel by 2027. Expanded offshore drilling wouldn't help prices at the pump until 2030. Together, ANWR and new offshore sites might someday add 2 million barrels a day to US production.
What would $1.44 a barrel mean to the price you pay for gas? One barrel of oil produces 42 gallons of gasoline, so consumers might save a little over three cents a gallon — almost 20 years from now. You might not want to wait to buy that Prius.
Moreover, as economist and former Labor Secretary Robert Reich recently pointed out, just because the US produces a barrel of oil doesn't mean only Americans get to use it. Every extra barrel we'd extract from ANWR or offshore would go into the vast pool of global petroleum production. Although 2 million barrels is a quarter of current US production, it's barely more than two percent of the global pool. America would get all the environmental risks, Reich noted, but only some of the oil.
Besides, industry critics point out that oil companies aren't using all of the production sites that have already been authorized. Although the oil industry has leases to 90 million offshore acres, mostly in the Gulf of Mexico, only about 20 million acres are being tapped. In estimates disputed by the oil industry, one congressional expert says exploiting all these areas already under lease could add 5 million barrels a day to US production.
Regardless of the rhetoric by both political parties, gas prices are not likely to ease much. Even so, largely because of lower taxes — the federal gas tax is just 18.4 cents per gallon — Americans still pay far less than most of the rest of the world for a gallon of gasoline. If higher prices finally make US consumers wake up to the realities of energy supply and demand and start conserving, this summer's pain may ultimately prove beneficial — sort of like cauterizing a wound. We need to stop the bleeding of runaway oil consumption.
And, indeed, it probably will be up to us, regular American consumers, voters and taxpayers, to solve this long-foreseeable energy crisis. Judging by the performance of New Mexico politicians — Pete Domenici's overdue awakening notwithstanding — we can't count on them.
"Politicians talk a strong game on energy policy," says David G. Victor, director of the program on energy and sustainable development at Stanford University, in another Times article. "They focus on bromides like 'energy independence' that poll well yet are meaningless or harmful in practice. And then the political system dithers on action that would yield real leverage on oil consumption."
Not that energy issues shouldn't be on your mind come November. Even if politicians can't do much good for the price of gas, electing the wrong ones can certainly make things worse — as we've learned the hard way on the bumpy ride from $1.76 a gallon in 2000 to $4-plus in this election year.
David A. Fryxell is editor of Desert Exposure.