By on September 15, 2008

From a crowd-pleasing chant at the Republican National Convention to op-eds at the New York Times, the refrain “Drill, Baby, Drill” is looming large in the American psyche. In the Gray Lady’s pages, Robert Hahn of the American Enterprise Institute and Peter Passel of the Milkin Institute (motto: Milkin’ The Issues) investigate the idea of penetrating mother Earth for more of that sweet, sweet dino juice. Opponents of drilling offshore and oil extraction in the Arctic National Wildlife Preserve (ANWR) argue that the benefits would be marginal. Hahn and Passel don’t necessarily disagree. They reckon 7b barrels could be pulled from ANWR, with another 11b available offshore, Hahn and Passel estimate the U.S. could thusly increase output by six percent, resulting in a 1.3 percent drop in worldwide prices. Meh. But the two argue that at $100/barrel, that oil would be worth nearly $2t not including the benefits of reduced pump prices for consumers. Development costs including environmental clean-ups would cost only $400b, making drilling an “economic no-brainer.” Hahn and Passel estimate the “non-use value” of ANWR at “only” $11b. The authors could “imagine a political bargain in which several hundred billion dollars went into a fund with a charter to preserve wilderness in the United States, or climate-stabilizing rainforests in Africa and Latin America.” In short, to protect the environment we must defile the environment. In reality, drlling is one of those idealism vs. pragmatism issues where win-win is a no-no. As long as the “Drill, Baby, Drill” refrain is still echoing out of St Paul, this kind of compromise is a long way off.

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32 Comments on “NYT: Drill, Baby, Drill...”


  • avatar
    psarhjinian

    Now that’s not much, but the two argue that measured at $100/barrel, that oild would be worth nearly $2t not including the benefits of reduced prices for consumers.

    Ok, so here’s the rub. It’s not about furrin’ oil, or reduced prices at the pump, it’s about securing a resource for the oil industry that will generate billions of dollars in profits which, lets be honest, aren’t going to be spread that widely (witness Alberta, and how the wealth is very much not trickling down to the rest of the nation).

    Come one guys, just say it: ANWR and offshore drilling is all about the money. I still wouldn’t necessarily agree with you, but at least I can respect the honest and we’d all be spared the hypocritical whinging about national security.

    Development costs including environmental clean-ups would cost only $400b, making this (according to the authors) an “economic no-brainer.”

    Again, witness Alberta for what the oil industry’s take on environmental management in a lightly-populated area looks like.

  • avatar
    AKM

    My guess is that as long as the “Drill, Baby, Drill” refrain is still echoing out of St Paul, compromise is a long ways off.

    Word. I’m not fundamentally opposed to drilling for more oil, but it really is time for us to realize the implications of economic development. With both candidates (yes!) agreeing that global warming is man-made, as well as a large majority of the scientific community, we need to be in agreement.

    As pointed out (I’m not sure if it’s in the report or the news item), creating funds for protecting the environment would be a fantastic use for income received from extra drilling. But wait? Can we tax (horror?!) the oil companies exploiting the area? Won’t politicians, under popular pressure, raid such funds for more pressing concerns such as bailing out mismanaged companies or saving real-estate investors?

    In the end, I’m opposed to drilling simply because I don’t trust the public and its representatives to do the right thing with the proceeds.

  • avatar
    ZoomZoom

    I am in favor of drilling, however, I’m concerned that we, our children, or our grandchildren will eventually run out. Oil isn’t being “made” by the Earth any more, and the Earth’s crust is of a finite volume.

    Oil will be needed in massive quantities for generations yet, for energy, but also as a chemical and manufacturing feedstock.

  • avatar
    Kevin

    I certainly say Drill Baby Drill. But, I’m wondering if the plummeting price of oil will undermine that momentum. For all you Nostradamuses who’ve yapped about how “The era off cheap oil is over”, are you still so sure?

  • avatar

    I’m not a particularly smart guy, but what is the value of exploiting a LOCAL resource when the price is going nowhere but up? If “we” have oil under our territory, and “they” have oil under theirs, shouldn’t we BUY THEIRS now while it is still relatively cheap?

    Think ahead 25 or 50 years. If all of “theirs” is gone, but we still have “ours” in the ground, won’t we be WAY better off?

    If I were a leader, or somebody who has oil under their feet, I’d hold mine and buy theirs, because mine will be worth orders of magnitude MORE when theirs is gone.

    Or am I just a far too strategic thinker for the average American?

    –chuck
    http://chuck.goolsbee.org

  • avatar
    quasimondo

    When oil was trading pretty at $150/bbl, it seemed like a sweet proposition, but now with oil having dropped below $100, it doesn’t look so attractive.

    We may still be approaching peak-oil, but when there’s a $6 drop in the price of oil based largely on the collapse of an investment firm, its quite evident that we’re not at that point and that the laws of supply-and-demand simply do not work here.

  • avatar
    Casual Observer

    I’ll agree with the “experts” that drilling in our prohibited areas will only decrease the price of oil slightly, but I don’t understand why that is the argument against drilling.

    Look at the flip-side: what is going to happen to the price of oil if we don’t drill for more? The price of oil has risen three-fold in the last 10 years, and now someone comes along with a way to actually lower the price, albeit only 2%, over the next 10 years – and you say “no thanks”?

  • avatar
    TwoTwenty

    “For all you Nostradamuses who’ve yapped about how “The era off cheap oil is over”, are you still so sure?”

    How do we know it won’t go back up again?

    I don’t understand why in the whole discussion of whether or not to drill there is hardly anything mentioned about conservation? What’s the harm in more efficient vehicles running on cheaper gasoline?

  • avatar
    Edward Niedermeyer

    There’s no doubt that this is a tough call, and all the dollars-and-cents analysis in the world will get you nowhere if another Exxon Valdez-type incident occurs. The major hole in the Hahn-Passel argument though, is that the $2t (or whatever) that the oil is “worth” is going to be divided a lot of different ways. Arguing that some portion of those unhatched chickens could be used to “offset” ecological impacts seems like a cynical play on liberals love of government programs and ecological offsets in general.

    In the past I’ve typically argued that drilling at ANWR is inevitable, and that we might as well get it over with. But Chuck Goolsbee’s point is an interesting wrinkle, and it gives me pause. Patience is, however, not the most American of virtues.

  • avatar
    psarhjinian

    What’s the harm in more efficient vehicles running on cheaper gasoline?

    Are you an Exxon shareholder or executive? Not making millions of dollars might constitute “harm” from their perspective.

  • avatar
    Orian

    And as I’ve said before, drilling off the coast will yield even worse price swings than we have now at the pump when a hurricane comes blowing through.

    And the oil companies won’t be building those pumps for free – we’ll pay for that at the pump too.

  • avatar
    carguy

    Drill or not drill – it won’t make any difference. An energy revolution is coming and “drill baby drill” is like shouting for more carbon paper and electric typewriters at the dawn of the computer revolution. The slogan should be “Adapt or die”.

  • avatar

    I don’t understand why in the whole discussion of whether or not to drill there is hardly anything mentioned about conservation? What’s the harm in more efficient vehicles running on cheaper gasoline?

    Americans generally don’t care about their country or their grandchildren or conservation in general. I’ve heard more than a few people in this country tell me that they don’t care what happens to anybody but themselves, and once they die, they have no reason to care. They believe America’s headed to becoming a third world nation anyway, so why should they try harder? It won’t get them anything.

    As for more efficient vehicles: I would like some more. But I have a sneaking suspicion that whatever oil we drill will just be used so people can buy Tundras and Silverados as commuter vehicles. Gotta have that three foot ground clearance and six foot ceiling height, am I right?

    Drill or not drill – it won’t make any difference. An energy revolution is coming and “drill baby drill” is like shouting for more carbon paper and electric typewriters at the dawn of the computer revolution. The slogan should be “Adapt or die”.

    I sure hope so. We need more solar, nuclear, and wind power desperately. Diversification of energy sources is the only way we can protect ourselves from oil shortages and other energy crises.

  • avatar
    faster_than_rabbit

    Chuck, if we’re at the point where the ANWR or offshore oil is suddenly the last of the stuff on Earth, it is entirely possible that the rest of the world has already converted to renewable energy. You would have to pick a point at which to start selling before that happened — do it too late, and you may not even be profitable.

    My only question about Drill Baby Drill at this point is: if we require oil drilled offshore to be processed and consumed only in the USA, would the GOPs still allow the legislation to move forward?

  • avatar
    shaker

    I’m with Chuck — keep the stuff we have for the future, as our grandchildren will need lots of carbon fiber and plastic for their solar-powered flying cars (ooooh I’m jealous!).

    Innovate, Baby, Innovate!

  • avatar

    Chuck is 100% spot-on. I have thought that for a long time – so many people are focused on short-term, “GIMME NOW!” solutions that our kids are going to be screwed if we continue to give in to our most selfish impulses. Hold the Oil and sell it to the Middle East when THEY run out. Domestic drilling is so short-sighted and not thought though. This drill baby drill garbage is, to my ears, like a ringing endorsement for premature ejaculation.

    This silliness, which at best will impact the market by less than 2%, simply distracts from what should be our real goal – protecting future generations by innovating NOW, but starting to look 10, 50, 100 years in the future instead of always to next week. We can grab and grasp at the closest solution like fools in the dark or we can generate some bright ideas and see our way out of this mess.

  • avatar
    willbodine

    The first thing an addict has to do to get clean is to stop using. Drilling for more oil is like buying from a different dealer…the same insane behavior will continue.
    America is uniquely capable of developing workable, affordable, renewable sources of energy by virtue of our geographic position, the size and quality of our research community, and our entrepreneurial spirit. To the extent that anything diverts us from this goal (ie, more dino-juice) our ability to become the world’s leading green-energy nation becomes less and less likely.

  • avatar
    ppellico

    What difference does it make.
    Oil is used for a ton of stuff.

    I can’t see my next laptop in tin.
    Its plastic from oil and so is the one you used to call me an addict.
    So, eventually we will drill and drill some more.

    Doesn’t really matter what the opposition says.
    When people decide they need something, come hell or the earth, they are going to get it.
    No NIMBY is gonna be able to hold off me and an on-coming crowd with empty buckets and drilling equipment.

  • avatar
    ronin

    Amazing how the price of a barrel has been dropping since the Drill Baby refrain started.

    The last thing the Saudis want is for us to drill, and for them to lose pricing power, hence control and wealth. Expect the price of oil to continue to decline as long as Drill Baby continues.

    As soon as Drill Baby stops the price of oil will go back up again.

    This is no coincidence.

  • avatar
    fisher72

    “For all you Nostradamuses who’ve yapped about how “The era off cheap oil is over”, are you still so sure?”

    YES. There will certainly be price fluctuations up and down before the crush.

    Indonesia just left OPEC since it is now an oil importer. UK, oil importer in 2009-2010. Mexico’s oil fields are crashing, to become importer in about 2015.

    Shell and Total are very sure of it and have public statements of their surety of the end of cheap oil between 2012-2015.

  • avatar
    blindfaith

    Well we are coming to the end of “CHEAP OIL”

    This leaves Canada with two trillion barrels!

    The US one trillion barrels!

    And Venezula with 2 trillion barrels of hard to get oil!

    What do we do Sell it for $120 a barrel since it costs about $40 a barrel to get. Lot of money?

    By the way, as we move to lithium batteries you mite want to know there is only 35 million tons of the junk and we don’t own any of it. O my the problems we get ourselves into when we depend on others (Global Economy)

  • avatar
    mdf

    ppellico: Oil is used for a ton of stuff.

    Oil as a feedstock is only 10% of the total consumed:

    http://peakoildebunked.blogspot.com/2008/01/326-detailed-breakdown-of-us-petroleum.html

    Almost all of the remainder is converted into fuel of some kind or another. The vast majority — 42% — goes to gasoline for cars.

    It should also be noted that even if every oil pump on Earth went dry as soon as I click on “submit comment”, there are many other feedstock substitutes available, beginning with natural gas.

    blindfaith: By the way, as we move to lithium batteries you mite want to know there is only 35 million tons of the junk and we don’t own any of it.

    http://paguntaka.org/2008/04/02/western-uranium-corporation-provides-corporate-activity-update/

    Wikipedia says that Nevada is in the United States, but as we all know, anyone can say anything at all at Wikipedia…

  • avatar
    DearS

    I do not believe it prudent to just start trusting the government, to expect to just give billions for the environment. I do not trust them. First give me the money.

  • avatar
    bluecon

    The only reason the Dems won’t allow drilling is to keep the environuts happy. Environmentally there is no reason not to drill unless you think a tiny increase in manmade CO2 is going to soon vapourize the planet Earth.

    Don’t forget that for the last ten years there has been a cooling of the temps on Earth while manmade CO2 has seen a huge increase. Don’t quite fit in with the AGW theory does it?

  • avatar
    psarhjinian

    The only reason the Dems won’t allow drilling is to keep the environuts happy

    The Democrats don’t have to keep the environmentalists happy, because those people are going to vote Democrat (or rather, not vote Republican) anyway. It’s a taken-for-granted vote, just as much as the Christian Right is for the Republicans, because these people are not going to cross the line in significant numbers.

    Conversely, the Republicans don’t have to appease hard-core environmentalists, nor Democrats the gun-rights advocates for the same reason.

    This marginalization of the marginal is the reason there’s functionally no real difference between the two parties, regardless of how either side paints the other as extremist.

  • avatar
    mdf

    ronin: The last thing the Saudis want is for us to drill, and for them to lose pricing power, hence control and wealth.

    This idea the US can drill itself into control of the price of oil makes the Saudi’s, the Canadian’s and Hugo Chavez laugh.

    The USA simply does not have enough oil to meaningfully influence the price from a supply point of view.

    This will be remain true at any price of the stuff.

    Honestly, you’ll do a hell of a lot better on the demand side.

    But I guess nostalgia is an even more powerful force than the laws of the nature when it comes to politics.

  • avatar
    johnny ro

    People want cheaper gas and heating oil. There is oil in the ground. So Drill.

    Anyone who puts together a thought string longer than that is intellectual elite, out of touch with the gum chewing voting public, and subject to easy ridicule.

    Arguments that it wont really help, or oil companies already sit on proven reserves, are long winded diatribes and the public already tuned you out.

    I think a politician can never lose by underestimating the public’s ability to reason out a situation.

    I think the drill train has left the station.

  • avatar
    blindfaith

    Since the environmentalist do not create money and money is needed to lobby. Lobby the government to do the environmentalist bidding seems like a very expensive proposition.

    Maybe the environmentalist lobbying is really funded by OPEC it is easy to do. Just have your US moslim friends send money. Has anybody checked?

    The small amount of Lithium Nevada has is not worth mentioning let alone mining.

  • avatar
    joeaverage

    We’re going to do whatever is cheapest and easiest. If it means screwing up the earth then we’ll do that.

    Every person I mention EVs to sooner or later talks about the cost.

    Everyone that I talk about PV (solar) with eventually talks about the cost.

    Doesn’t matter what the RIGHT answer is – cost is a major factor.

    Now conversely if I suggest free Linux over $200 Microsoft Windows – then the conversation shifts to easy… (Linux is easier I think).

    So there you have it – whatever America will choose – will be max profits or easy.

    I’d agree with Mr. Goolsbee but I am concerned with how many American dollars are going out of the USA already. Potentially that would enable those foreign countries to come back and buy things with their American dollars but I’m not so sure that this is what is going on.

    Tell me why a trade deficit is a good thing.

    Our county is our state’s largest recycler of household waste. I heard a fellow argue against recycling b/c of the cost (i.e. not a profit). Still, even if there is a cost, isn’t it the right thing to do?

  • avatar
    Alex Rodriguez

    All of the “peak oil” geniuses are having the hats handed to them. Oil is at $91 and falling. Why? Exactly for the reasons I’ve said for months: $150 oil was a fantasy world built on the backs of hundreds of billions of dollars from the Lehman’s and Goldman’s Sachs of the world. Now that those banks are fleeing commodities, there is no one left to buy oil except the natural oil producers and consumers.

    $150 had absolutely ZERO to do with Supply and Demand. It had everything to do with speculation from people who had no intention of ever taking delivery.

    I called this plunge months ago, if I had time, I’d cut and go and find my exact statements here on TTAC (I will if challenged.) It is the Dot Com, the Enron bust all over again.

    Peak oil. What a friggin joke.

  • avatar
    Alex Rodriguez

    Found one from July 31, where I predicted Oil below $100 in 60 days.

    “Alex Rodriguez :
    July 31st, 2008 at 4:40 pm
    “Gas prices plummet in Oklahoma City”

    I’ve said repeatedly on this site that Oil Prices as constituted two weeks ago were not based in any type of reality, but based purely on hundreds of billions of dollars in long positions taken by the Goldman Sachs of the world.

    People here were telling me how I was crazy, that the angels in the oil commodities markets were simply bulwarks of supply and demand.

    Just like I’ve said all along. Oil will go back beneath $100 in the next 60 days if not sooner. I would not be shocked if it gets back under $70 by the end of the year.”

  • avatar
    mdf

    blindfaith: The small amount of Lithium Nevada has is not worth mentioning let alone mining.

    http://lithiumabundance.blogspot.com/

    The web-page lists a number of sources of lithium within the confines of the USA. The eye-ball total is about 6 million tonnes — a third of that in Nevada — or about 15% of your claimed 35 million tonnes world-wide.

    http://www.daughtersoftiresias.org/greenwiki/Peak_lithium

    “[at] 10x the [current] price, […] you can easily afford to extract it even from seawater.”

    What this means is that in a future lithium economy, if Argentina and Chile was captured by Hugo Chavez and refused to sell you lithium, you could simply give him the finger while you make your own.

    Now let’s contrast that to another imagined future: John McCain is elected, and he puts a collective gun to the heads of 300 million Americans, forcing them all onto oil platforms in the Gulf, into the taiga of Alaska — without mosquito or black fly netting — or the semi-arid deserts of western Colorado, Utah and Wyoming, or to the iron mines or steel smelters to build all the pipes and decking, there is no possible way you could make more than a minuscule dent in oil production for a significant period of time. You just don’t have enough of the stuff, even if production cost was exactly $0 and the sale price of oil was $1000/bbl, and everyone would pay it cheerfully. (As http://www.daughtersoftiresias.org notes in another page on the wiki, past $300/bbl or so, you’d do better to just synthesize the oil from raw carbon, hydrogen or other feedstocks. If oil made any sense at all at that point…)


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