A large portion of Americans, including those in the White House, think that drilling for oil domestically could help reduce America’s reliance on foreign oil and help us reclaim a measure of energy independence as well as alleviate the economic downturn that current oil prices are inducing.

This week the Times reported that President Bush is seeking to repeal a ban against offshore drilling in Florida that his father President Bush (41) implemented. He and Vice President Cheney have long campaigned for exploitation of the Arctic North Wildlife Refuge (ANWR) in Alaska, but have been defeated in Congress.

Should we pursue a domestic drilling strategy to help stem foreign oil dependence? Long answer: Yes, if we were Saudi Arabia. Short answer: No.


Longtime readers of 2 Dinar will already know me as an environmentalist, but also as a pragmatist who sees huge, untapped synergies between environmental and economic sustainability, instead of the mutual exclusivity preached by lobbyists. But the debate over oil has become yet another speculation-fueled tirade of ignorance dominated by outmoded industrialists, obtuse news media pundits, and crusading environmentalists. To make sure I never found myself in one of those camps, I took a graduate business class about the oil and clean tech industries, taught by a leading journalist in these sectors. The takeaway: there’s plenty of oil in the ground, but the ecological, political, and economic costs of relying on it will totally outstrip the threat of running out of it.


Why Oil is Expensive

Oil is a highly volatile commodity, and as the lifeblood for industry, its value is analyzed, gambled on, and traded just like debt, which means that intangibles outside of the world of refinement and distribution can drastically affect its price. Additionally, worldwide demand from growing economies (including ours) has increased while the oil industry has not grown its production or reserve capability at a comparable rate.

An article by Keith Sill, an economist with the research department of the Philadelphia Fed, said that most oil shocks have been associated with conflict in the Middle East, and indeed, without even counting the major wars in that region, concerns about the vulnerability of the Saudi oil production apparatus to terrorist attack have probably floated the oil price substantially on their own. Oil is volatile, and its price reflects far more than simply how much OPEC is pulling out of the ground.


Reserves

Of the world oil reserves, estimated at 1.1 trillion barrels, 23% is located in Saudi Arabia, 16% in Canada (the largest supplier of oil to the US), 12% in Iran, and 10% in Iraq. The US holds less than 3% of the world’s proven reserves.

Despite these statistics, the US accounts for 26% of world oil consumption, a staggering 20.8 million barrels a day and over 1.4 times the total consumption of the EU despite having an economy 12% smaller than the EU and a population 39% smaller.

If America is going to address its oil problem, relieve heating and transportation costs on American families, and reduce the effect of high prices on our economy, we are not going to do it by drilling within our own borders. By my calculation, if we were able to pull all 21 billion barrels of proven oil out of the ground in and around the US, at the CIA-listed daily consumption of 20.8 million barrels, that oil would only last 33 months, even with a flat population and GDP curve.

An additional note about the oil in America is that that oil is not ready to come out of a gas station nozzle near you. The oil in ANWR, for instance, would take 10 years to get to market. And while Florida is a lot closer to the American market than Alaska, drilling there won’t make today’s oil spike go away. Don’t forget, in 2002, oil cost less than $20 a barrel.


Leap Frog

In the clean tech sector, “leap frog” is the term used to describe moving developing economies past the industrial era energy apparatuses (coal, oil) and straight to sustainable technologies like wind and solar. Without a doubt, there’s no such thing as a perfect clean energy solution yet, but investing in unsustainable, polluting, and price-sensitive energy systems is far more imperfect.

In the same way that developing nations are partnering with NGOs as well as foreign investors in clean tech to bypass oil, America should seize this opportunity and do the same. Instead of continuing to subsidize the oil industry and maybe pulling out two and a half years of oil from ecologically delicate areas, let’s instead invest that time, money and effort into figuring out how to get off oil and onto something sustainable. If we’re pushing China to do it, with an economy that is growing five times as fast as ours, we can do it too.


Scamming for a Fix

I don’t know about you, but I’m embarrassed when the president of the US, allegedly the most “can-do” nation in the world, repeatedly goes to the Saudis and begs for increases in oil production to sustain our ridiculous habit. Just as futile, drilling in and around the US for oil is nothing more than searching the couches for loose change, and the analogy holds when you consider just exactly what you can buy with loose change- almost nothing. Telling Americans that off and on-shore drilling in the US is a potential solution to our oil problem is either sheer ignorance, or an attempt to exploit citizens to the benefit of the oil industry. I’ll not cast the first straw, but I will say this, our oil problem is here to stay as long as Americans stay complacent.


Do Something: Your Senators Your Representatives

Further Reading: 2 Dinar: Oil Mathematics Part I NY Times (1) NY Times (2) BBC CS Monitor CIA on Oil Consumption CIA: US factbook DOE on US Oil Imports Wikipedia Oil Reserves Sum-up