I’d like to repeat how surprised I am at the size of the gains from drilling, or at least what appears to be the best current estimate of such gains. What happened is simple. I read people writing "Price won’t go down much from drilling, therefore the gains are small," in various ways. That is a non sequitur because there is producer surplus as well! I committed a simple error. Yet again. And I committed this error because it fit in with my (nonetheless largely correct) preconception of politicians as bozos who will say anything for political gain or to sound good on TV.
Addendum: An Op-Ed on the topic. And here’s a skeptical Andrew Sullivan reader. Like me, it doesn’t seem he ever tried to look for a number.
Then shouldn’t you have thought that the anti-drilling politicians are bozos too?
In addition just because the price falls by a little bit doesn’t mean that the increase in consumer surplus is trivial. Remember, the reason the fall in price will be small is that it will be enjoyed by billions of people.
Drill, baby, drill! Run, Sarah, run!
I found some great pictures of the pristine (i.e., empty) area that they want to drill in and the effects of current extraction activities on large animals (caribou grazing near a well, a bear walking on the pipeline):
http://atlasshrugs2000.typepad.com/atlas_shrugs/2008/06/i-received-this.html
It is a very common theme that discoveries around the world are small compared to global supply/demand but very large compared to any company’s profits.
These are HUGE opportunities for somebody.
And sadly those somebodies can reap their rewards even as oil consumers around the world still seek “solutions.” (Maybe that is the key in identifying political BS, whether drilling is pitched as good, or as a solution.)
FWIW, I liked Justin Fox’s piece on “all of the above” strategies, resurrecting Amory Lovins and conservation/efficiency to the discussion.
I accept the proposition that global warming has already spelled the doom of the Arctic ice sheet; therefore, I don’t see how ecological objections can be made to new drilling in the arctic. The habitat of the polar bears is doomed with or without drilling. Ecological objections just seem like closing the barn door after the caribou have gone.
Tyler, You just don’t care about the environment or climate change. I’m making this as an observation, not as a judgment. If someone doesn’t care about the environment, then of course it makes sense to just open those areas up and let them be exploited if it is profitable to do so, regardless of any effect on oil prices.
You may just want to argue that the oil would otherwise come from elsewhere (I don’t know if you’d argue this), but this assumption implies that the supply curve is flat, which I don’t think you believe.
I’d almost be willing to do what is suggested in the first addendum, and “give ANWR to a consortium of environmental groups.” That would satisfy the John Muir in my soul.
Unfortunately, I don’t think they’d be really interested in the strategic half of the question – this is oil on federal land and should be “spent” optimally for not just us, but children and grandchildren.
Odograph, from last night’s speach:
“We will produce more energy at home. We will drill new wells offshore, and we’ll drill them now. We will build more nuclear power plants. We will develop *** clean coal technology ***. We will increase the use of wind, tide, solar and natural gas. We will encourage the development and use of flex fuel, hybrid and electric automobiles.”
But wait, aren’t the taxes mostly pigovian? So the government revenue we would get from drilling would be addressing the inefficiencies caused by the externality of air pollution (as well as the “dependence on crazy foreigners” externality). You are counting only benefits and not costs.
…producers, when allowed access to ANWR, do not take into account the social cost of their actions.
What, exactly, are the social costs of drilling oil wells in the coastal plain area adjacent to ANWR? (Not in ANWR proper, I might add.) Are the caribou worried about the aesthetics of drilling rigs? Maybe we need to perform a contingent valuation of the utility that accrues to elk from having an “unspoiled” view of the tundra.
Except we export a great deal of our own oil. So no, price wouldn’t go anywhere.
Except we export a great deal of our own oil. So no, price wouldn’t go anywhere.
You’re living down to your name, craptacular.
Most recent import/export/production data (from the EIA):
Crude imports: 9,830 bbl/day
Crude products imports: 2,804
Domestic production: 5,109
Total supply: 17,743
Crude exports: 26
Crude products imports: 1,363
As you can see, crude exports are 0.15% of the total supply. Crude plus products exports make up 7.8% of total supply.
Most of the exports are to Canada and Mexico, but we are a net importer from both of those countries.
So, your claim that we export a lot of our own oil is easily demonstrable as, uh, crap.
One thing that is obvious is that the gain per Alaskan is big. They have a population of less then 1 million.
This could fund a lot of state politics. To the extent to which revenues are doled out per capita, this is also an incentive to have large families.
Down here in the southwest Solar-Thermal works now. Unfortunately it isn’t as sexy as less efficient photovoltaic (it is especially less sexy than the especially less efficient rooftop photovoltaic programs).
Meter,
There are billions of barrels of oil that are ready to be harvested, and are being harvested every day. We use that oil because it is cheaper and easier than the alternatives. I can’t imagine that this simple, objectively true statement can be disputed, unless you believe there is some sort of grand conspiracy afoot to suppress cheap and easy renewable energy technology.
You say that Alaskan oil is not cheap, but cheap is a relative term. Cheap compared to what? It will be developed with private investment because a profit can be earned.
So, just who’s money do you want to “pour” into solar development? When there is a profit to ber made from solar cars, you won’t have to worry about private firms “pouring” their own money into solar cars. Until that point, the reluctance of investors to risk their money on that technology is a signal that we shouldn’t be using it – yet.
Fully privatizing oil resources is the best model for maximizing oil profits. The Saudi Arabian government has openly said it will save resources for later generations.
Sell pieces of ANWR today, with the right to drill as much as wanted at any point in time, with no change in regulations, property rights, or tax rates specific to energy.
I believe the Irish had a policy of restricting the use of peat-moss, because they wanted to save some for future generations.
What a wise decision that turned out to be.
Meter: we appear to be talking past each other. I believe that when it makes sense for us, as a society, to develop solar-powered cars plenty of firms will try to do so without the need for government prodding. Until that point, the government prodding is wasteful and misdirected. Government is notoriously bad at picking new-technology winners. Clearly, you believe that unincentivized bureaucrats and pandersome politicians are better at forecasting the optimal path of society than the atomistic mass of individuals risking their own time and fortunes. Two clearly different world views, it would seem.
Pour $600 billion immediately into research earmarked specifically for the development of a manufacture-ready solar-powered car and in two years I’m pretty sure you’d have something useful and cheap, relatively speaking.
You’re “pretty sure” because you have absolutely no clue how science, engineering, and product development work.
Solar is an information technology but an engineering nightmare.
Do we rationally reserve enough oil? If not, this could be a bit like the Danish gym article you posted at a national level, and irrational expressed reason to rationally reserve some known oil for future needs. That it would take a few years to exploit is a good barrier against impulsive decisions to use the oil during lower level emergencies. I think that might be worth factoring into analysis.
If I understand your arguement correctly, you are saying that because the cost of oil is so high, drilling and selling the oil will generate a great deal of money that can be used for all kinds of socially beneficial projects. There are several problems with this argument. First, where is the money coming from? Answer, the rest of the US; so this is just a redistribution of capital within the US. Second, who will be the recipient of the money. Answer, the state of Alaska and whatever oil companies are involved, plus whatever tax revenues are generated for the federal government. Do you really think the oil compnies and the state of Alaska are going to spend any significant amount of money on the development of alternative energy sources? I don’t. Does Alaska have a history of such largesse? They have been the recipient of oil revenue for many years now. Do you think the federal government will spend significant amounts of the revenue on energy research? Maybe an Obama administration would, but I doubt that a McCain administration would. And in either case we have such a budget deficit now that my suspicion is that the cash will primarily go to other priorities. The only net plus I can see is the possible increase in federal revenues.
And the more cheap cabal gold is very good for you.
Is it realistic?
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