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.
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.