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kpscott (89.34)

The Case For Drilling

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September 04, 2008 – Comments (9) | RELATED TICKERS: USO

I saw a political cartoon today about oil drilling that really made me think, and thought I’d share my thoughts here.

Reasonable people can disagree on many of the issues related to oil drilling, first and foremost being adding additional supply to bring down the cost, followed closely by the environmental impact of drilling.  The one argument I’ve heard that completely defies logic goes more or less like this, “It won’t do us any good anyways, it’ll take 10 years for any new drilling to result in any additional supply”.  What’s most shocking about this statement is that people nod their heads and agree!  The notion that we shouldn’t do something today because it doesn’t provide an immediate benefit is a completely vapid argument, and I wish people would start challenging the assertion.

Let me ask you the same basic question about other topics: 

Why invest your money?  It won’t provide you any benefits until you retire, so why do it? 

Why send your child to school?  It’ll take around 16 years for your child to earn her college degree, so why do it? 

Why plant a tree?  It’ll be years before it grows big enough to provide any shade, so why do it?

I strongly dispute the assertion that it will take a decade to bring new supply online.  Maybe I’m one of the only ones who watched the show, but I watched Black Gold on TruTV, primarily because I wanted to learn about the mechanics of oil drillling.  I saw 3 drilling rigs drill 7 holes in 50 days, and every single one of them struck oil.  Are we to believe that it takes another 9 years to pump the oil out and refine it?  Poppycock.  I’m not suggesting we should change public policy based on a TV show, but I am suggesting that the 10 year figure that gets thrown around is excessive.

Even if 10 years was an accurate number, that’s an even greater reason to start drilling NOW.  If it were to take 10 years, that means we’d have 10 more years of uncertainty about our energy future.  What do you think the gas prices will be in 10 years if we do nothing?  $7 per gallon?  $8?  $9?  That may seem crazy, but it’s not all that far off the mark if history is a guide.

In inflation adjusted dollars, a gallon of regular in 1998 went for $1.50, give or take a dime.  Today, we’re sitting at $3.50, give or take a dime.  That’s a 133% increase.  Yow.

Since I’m on the topic of historical context, isn’t it apparent to anyone else that we’re witnessing the largest transfer of wealth in the history of the world?  What will the impact of this be in the decades to come?  I like to think that maybe this is one small part of a grand strategy to get everyone else to exhaust their reserves, leaving us as the only game in town with oil reserves to tap, but I highly doubt it.  If so, bra-VO to the mastermind pulling the strings behind the curtains.

In the end, the argument for investing your money, educating your child, planting a tree, and exploring for more energy sources (including but not limited to oil & gas) are all worthwhile endeavors.  They are also propositions that take time and therefore should be started as soon as is practical to ensure we have enough money, education, shade, and energy when we really need it.

9 Comments – Post Your Own

#1) On September 04, 2008 at 11:18 AM, KWT8011 (< 20) wrote:

" I’m not suggesting we should change public policy based on a TV show, but I am suggesting that the 10 year figure that gets thrown around is excessive."

Yeah, but your information comes from a TV show about drilling for oil. The ten year figure comes from industry analysts.... No offense but I think it'll take much longer than 50 or 100 or 1000 days.

PS - The arguement is about oil exploration rights. That means companies will begin looking offshore for oil, then they need to build the platforms, begin drilling, hopefully find the oil, and so on..

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#2) On September 04, 2008 at 11:21 AM, kdakota630 (32.05) wrote:

I never understood that argument about not drilling either, especially when it's usually the same people clamouring for solar power using the argument, not realizing it'll take the same amount of time (or longer) for solar power to be a viable alternative.

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#3) On September 04, 2008 at 12:33 PM, devoish (98.76) wrote:

“It won’t do us any good anyways, it’ll take 10 years for any new drilling to result in any additional supply"

What was originally suggested by drilling advocates was that allowing off shore drilling would help bring down prices  today.

Petrobas found a huge amount of oil last spring. Gas and oil continued upward. No effect on todays prices.

I strongly dispute the assertion that it will take a decade to bring new supply online.  Maybe I’m one of the only ones who watched the show, but I watched Black Gold on TruTV, primarily because I wanted to learn about the mechanics of oil drillling.  I saw 3 drilling rigs drill 7 holes in 50 days, and every single one of them struck oil.  Are we to believe that it takes another 9 years to pump the oil out and refine it?  Poppycock. 

Those were on shore rigs, no? Petrobas has leased all available deep water rigs, ask TMFDeej. By the time the off shore fields are mapped, States offer approval, rigs get built, drilling gets done 7-10 years out. Swimming in your pool is not the same as swimming the English channel, just because it is swimming.

Since I’m on the topic of historical context, isn’t it apparent to anyone else that we’re witnessing the largest transfer of wealth in the history of the world?  What will the impact of this be in the decades to come? 

Agreed, not since the years before the great depression have so few of the wealthiest Americans had a higher percentage of our Countrys income.

In the end, the argument for investing your money, educating your child, planting a tree, and exploring for more energy sources (including but not limited to oil & gas) are all worthwhile endeavors.  They are also propositions that take time and therefore should be started as soon as is practical to ensure we have enough money, education, shade, and energy when we really need it.

Agreed again! Please call you Republican Congressperson and ask them to stop fillibustering Senate bill S.3335 that will extend the renewable energy tax credits, and lower your energy costs much sooner than 7-10 years.

Devoish,

who thinks there is a closer relationship between poor Republican polling numbers, election years, and gas prices, than between potential new drilling and gas prices. But the price trend is not broken.

 

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#4) On September 04, 2008 at 12:54 PM, VTEngineer2001 (< 20) wrote:

I agree with your overall sentiment, however, what the TV show didn't discuss is the timeframe it takes to find and buy/lease the land to drill on - the legal time often takes years.

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#5) On September 04, 2008 at 12:54 PM, VTEngineer2001 (< 20) wrote:

I agree with your overall sentiment, however, what the TV show didn't discuss is the timeframe it takes to find and buy/lease the land to drill on - the legal time often takes years.

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#6) On September 04, 2008 at 3:09 PM, kpscott (89.34) wrote:

Those were on shore rigs, no? Petrobas has leased all available deep water rigs, ask TMFDeej. By the time the off shore fields are mapped, States offer approval, rigs get built, drilling gets done 7-10 years out. Swimming in your pool is not the same as swimming the English channel, just because it is swimming. 

Yes, they were all onshore rigs.  I'm not sure I agree with the statement about Petrobas though.  I work in the offshore drilling industry and can name at least 3 rigs that haven't yet been leased (because they're being upgraded).  Further, I can think of at least 6 others that will be built in the next 2-4 years.  These are just drilling rigs (ships and semis), not production rigs.

Agreed again! Please call you Republican Congressperson and ask them to stop fillibustering Senate bill S.3335 that will extend the renewable energy tax credits, and lower your energy costs much sooner than 7-10 years.

Looks like I'd need to address my comments to my senators, not my congressman.  Without getting too political, I think the practice of blocking votes in this manner (regardless of the party doing it) is an inexcusable abuse of power.

Sounds like we're all in basic agreement - since these things take such a long time (regardless of the exact amount of time), we should get the ball rolling now.

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#7) On September 04, 2008 at 4:24 PM, BigDMan64 (98.94) wrote:

I think some great points have been made on both sides of this argument although I tend to agree with the original poster than trying to make a case not to drill only because it may have delayed effects is both illogical and shortsighted.  I am also not in favor of promoting alternative energy tax credits just to feel good that we are doing something.  If something is economically viable (wind power) and can reduce our dependence on foreign energy by all means lets support that development with tax credits.  However, the overbuilding in the ethanol industry that was based solely on a desire to be more green with little effect on the long term energy supply and without any prospect of economic sustainability was the political snafu of the century.  Forcing mandates of ethanol blends in excess of our current blending capacity while driving feed costs through the roof was neither well thought out or intellectually honest.  If we really want to utilize more ethanol, instead of subsidizing an industry in the US that has no chance of every making real profits, why not just lower the tarriffs on Brazilian ethanol that is made out of sugar cane which is much more efficient, cheaper than US corn ethanol and doesn't negatively impact other industries that rely on corn (livestock feeding) or generally raise total food costs.

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#8) On September 04, 2008 at 4:48 PM, LordZ wrote:

I think they had a hidden agenda with raising food prices, trying to make food less and less affordable so that people would only be able to afford so much so as to make them less fat and heavy.

Imagine trying to wrestle twinkies and ice cream away from a starving pms overly large man or woman.

 

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#9) On September 04, 2008 at 10:05 PM, devoish (98.76) wrote:

Looks like I'd need to address my comments to my senators, not my congressman.

Oops, I know what the S stands for.

Sounds like we're all in basic agreement - since these things take such a long time (regardless of the exact amount of time), we should get the ball rolling now.

On getting started, yes. On burning oil, no. I don't like subsidizing oil with asthma treatments, heart disease, or any of the other health problems air pollution causes.

If something is economically viable (wind power) and can reduce our dependence on foreign energy by all means lets support that development with tax credits. 

Agreed. Lets call those Senators.

However, the overbuilding in the ethanol industry that was based solely on a desire to be more green with little effect on the long term energy supply and without any prospect of economic sustainability was the political snafu of the century.  Forcing mandates of ethanol blends in excess of our current blending capacity while driving feed costs through the roof was neither well thought out or intellectually honest.  If we really want to utilize more ethanol, instead of subsidizing an industry in the US that has no chance of every making real profits, why not just lower the tarriffs on Brazilian ethanol that is made out of sugar cane which is much more efficient, cheaper than US corn ethanol and doesn't negatively impact other industries that rely on corn (livestock feeding) or generally raise total food costs.

Partially agreed. The Greenies were writing articles against using corn in 2005, and you say little affect on long term supply. I believe we have used more oil as it is net negative energy to use corn. Dump the tarrif on Brazilian ethanol and havet open competition against oil? Excellent.

There is also some suggestion that as the ethanol industry is learning and adapting to other feedstocks it is becoming energy positive, but is still miles from wind, which is cheaper than coal.

kpscott, thanks for starting a sane discussion, and keeping it sane.

Ramen

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