Business & Politics
Obama’s Offshore Drilling Plan: How Much Will It Help?
The president says it’s part of a bigger plan to wean the U.S. off of foreign oil.
By Jim Ostroff, Associate Editor, The Kiplinger Letter
March 31, 2010
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President Obama’s plan to open vast offshore areas for oil and natural gas leasing marks a big shift in U.S. energy policy. Obama, like President Bush before him, recognizes that the U.S. has little choice but to look offshore for new sources of oil, given the alternative of continuing to boost imports. Domestic production peaked at around 8 million barrels a day in the early 1970s. It’s inexorably grinding down to just under 5 million barrels per day, against daily usage of around 9 million barrels.
But it will take almost a decade to make much of an impact on gasoline prices or the cost for fuel to run machinery, heat homes, offices and industrial plants.
The long lead time will mean a slow but steady ramp-up of fossil fuel production, likely first off Virginia’s coast. Exploration should start in about two years, in fields that hold around 130 million barrels of oil and 1.1 trillion cubic feet of natural gas. Full scale production is at least five years off. This will be followed by drilling offshore from Delaware to Florida, in deep water off Alaska’s coast and in previously closed areas in the Gulf of Mexico.
A build out of new production from the middle of this decade onward is aimed at extracting around 135 billion barrels of oil and 675 trillion cubic feet of natural gas. That’s equivalent to around 15 years of oil consumption and nearly 30 years for natural gas at current usage rates. This expansion will be augmented by oil and gas production from North Dakota’s vast fields. The mammoth Bakken Play and Three Forks-Sanish formation likely will see full scale output reached in the late 2020s.
Court challenges by environmental groups are a near certainty. They may well slow production, but are unlikely to throttle it, barring blunder by the Interior Department, such as bollixing up leasing bids or delaying environmental studies required before any offshore tract can be made available for mineral exploration.
While some residents will oppose the move, state governments needing revenue are likely to be swayed by the boost that offshore oil and natural gas production will provide, thanks to revenue sharing formulas that will yield billions of dollars in royalty income.
Obama announced his intentions as part of a broad move on energy security. The drilling is part of a plan to help transition to alternative energy sources, such as wind, solar, geothermal and biofuels, within a few decades. Now, alternative energy accounts for less than 5% of all U.S. electricity usage and a tiny fraction of the 6 billion gallons of gasoline, diesel and heating and industrial fuels burned annually. Even a concerted federal industry push is unlikely to double renewable fuels’ share by 2015. Additional natural gas supplies will be used to help electric utilities move away from coal.
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Reader Comments (4)
Posted by: brad at 03/31/2010 09:59:20 PM
I burn water; or hydrogen. I have really increased my gas mileage in doing this, now I am a believer....this works.
Posted by: Bob at 04/01/2010 10:03:13 PM
I would rather use up the imported oil first and save our reserves for our future. Some day oil will be too valuable to burn. Of course the real answer is conservation and not higher priced fuel or ridiculously expensive hybrid cars that the average person can not afford. Since it is perfectly legal to ride a motorcycle without bumpers,air bags or seat belts, why are so many fuel efficient and affordable small cars kept out of the U.S. by overly zealous crash standards? If it really had to do with saving lives why not just lower the speed limit to 40 MPH. Just what speed limit would you choose over lives saved??? I have wanted a Smart car for over nine years but only recently was an overpriced and bloated version approved for the U.S. market. Many other economical sub $10,000 cars are being kept out as well instead of being utilized to help us reduce energy consumption. I would love to have one of these as an inexpensive second car for my 30 MPH around town errands.
Posted by: Bruce Allen at 04/04/2010 03:56:55 PM
This is good news except that we should have been doing this about 30 years ago. That would have given us plenty of time to develop a new form of energy that would have replaced fossil fuels by now.
Posted by: CEA at 04/07/2010 12:23:40 PM
A BIG STEP IN THE RIGHT DIRECTION March 31 was a groundbreaking day of such historic significance that had its developments come one day later, it might well have been mistaken as an April Fools Day joke. President Obama has proposed opening large swaths of the country to offshore drilling, reversing the staunch anti-drilling stance he took while he was campaigning. It a decisive move that also marked a dramatic departure from the delays that have characterized Obamas Interior Department in recent months. Obama's proposal is not perfect and today, as so many not-in-my-backyard types are attacking the new policy, it will be tempting for those of us who support a strong domestic oil sector to criticize the president for not going further in supporting drilling in many of the countrys oil rich regions, like Alaska, or to question the timing or the political motives behind his decision. While there will be time to examine the proposal in more detail, our first order of business must be to applaud Obama's courageous move, and offer to help him keep true to his words. In announcing a plan to open much of the Gulf of Mexico and the East Coast to drilling, he has not only opened up some major new sources of oil within our borders, he has also shown a willingness to break with his core allies for the greater good of the country. At CEA, we have consistently chronicled the battle to produce more homegrown energy, but it has too often felt like a losing battle. We have offered all the arguments, from how domestically produced oil creates jobs and strengthens national security, to how a strong oil sector can coexist with strong environmental protections. We have offered all those arguments, but at times it felt like we werent getting through. Obama's support of offshore drilling has shown us that there need not be two sides in this issue; that anyone who is for a strong economy and strong national security should include development of more oil and natural gas here at home, and buying less of it from distant markets while, of course, we also develop all forms of alternative energy. Given our energy needs, in order to sustain economic growth and produce jobs and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable homegrown energy, Obama explained. Surprising? Yes. Courageous? Definitely. Practical politics? That too. But, if the appropriate actions follow the President's words, it's no joke.