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Politics : Politics of Energy -- Ignore unavailable to you. Want to Upgrade?

To: Eric who wrote (3460)	12/15/2008 3:26:01 PM
From: Brumar89	Respond to of 86356

While if you dig in the article enough, you'll find facts, this article is written in a way that encourages unsophisticated readers to draw a number of flawed premises or assumptions imo: Such flawed assumptions would include: A) That drilling is only worth doing if it will produce "energy security", itself a nirvana-type term in that the meaning is hard to pin down, or if it will "significantly increase B) That decisions on how much drilling should take place are collective decisions that "we" as a society ought to decide. C) That there is a baseline of domestic production that will continue in the absence of drilling or "more drilling". D) That describing the US as a mature oil region means that every part of the US is "mature" with little to offer if drilled. There are areas within the US which have never been exploited - ANWR, the Alaskan north slope gas reserves, and most of the OCS. These areas are still virgin territories. -------------------------------------------------------------- Specific comments are below: Those who advocate increased oil and gas drilling generally, and quite reasonably, assume that increased drilling will result in significantly increased production of oil and gas. Here the author writes as if there's a baseline of production that will be there in the absence of drilling or "increased drilling". I'm sure he knows better - he in fact says so further on, but I think that's what he's encouraging unsophisticated readers to think. Of course, this isn't so. Drilling is necessary not just to "significantly increase production" but to maintain current production levels. If E&P efforts are so successful they significantly increase production from the current level, great. But if not, drilling will still produce significantly more production than not drilling will. The key issue involved isn't 'will allowing more drilling produce significantly more production than we have now', its 'will allowing more drilling produce significantly more production than not allowing more drillling will'? It should be pointed out that all drilling is done by private firms seeking to make a profit. Accordingly, they won't do it unless they believe the drilling will pay for itself and earn a decent return on investment. When prices decline and profit outlooks from drilling dim, private firms do not hesitate to cut back on drilling plans. Thats happening with many companies right now. The free market price mechanism is constantly sending signals to private investors. So its not like massive sums of money will be wasted drilling nothing but worthless holes in the ground. In fact, many drilling advocates implicitly assume that the energy gained from increased drilling will be roughly linear: that is, doubling drilling effort is expected to eventually bring something like double the energy resources to market. Really? Who says that, I'd like to know? If there are people who assume that, they're making very simplistic assumptions. I work for a company in the drilling industry and people who make drilling decisions certainly don't think in this simplistic manner. In fact, for the last several decades, the relationship of drilling effort and energy return has been so unfavorable that there is little evidence that even vastly increased drilling will significantly increase U.S. domestic energy production. Well, gee, what does that mean? Maybe we should just shut down the drilling industry? After all its not going to achieve anything. Repeat, drilling is done by private companies seeking profit. They're not going to do it if its not worthwhile. Who is better equipped to make drilling decisions? People who are putting their own money on the line with no guarantees or some government bureaucrat or politician? 3. Over this large time scale, there is remarkably little correlation at all between drilling activity and oil production. Why should there be? The rig count includes rigs seeking gas as well as oil. And the US produces more than twice as much natural gas on an energy equivalent basis as it does oil. The rig count is mostly a barometer of activity in the drilling industry. Its real important to suppliers of products and services to the industry. Its not a good means of forecasting production of either oil or gas. The big missing element from Figure 1 and 2 is price. If the prices of oil and natural gas were shown, one would see the rig count is driven by price. Naturally so, since all drilling is done by private firms seeking to make a profit. 4. The best case one can make for the benefits of increased drilling is during the period from 1971 to 1981 when—spurred by the oil embargo, the huge price increase of oil, and Jimmy Carter’s infamous cardigan—the number of active rotary drill rigs more than quadrupled. I can guarantee you the increased drilling in this period was spurred by the price of oil and not at all by Jimmy Carter's sweater. Figure 3 is quite an extraordinary graph—and a sobering one. Unlike the loose overall historical relationship between domestic drilling and production, there is quite a tight relationship between drilling activity and subsequent oil and gas energy production per rig. The relationship, however, is precisely the last one you would want if you hope that drilling will solve the United States’ energy problems. The relationship shows that more active drill rig translates quantitatively into less energy per rig. Of course, another way of looking at Figure 3 would show that drilling productivity per rig employed has increased over time. In fact, this has occurred. Better geoscience and geophysical mapping, directional drilling - where the drill bore can follow the oil or gas bearing strata horizontally, fracing the oil or gas bearing strata - such things have dramatically increased the return per rig employed. Take a look at where the red triangles covering the last 15 years appear on the curve. There seems to be an assumption that drilling occurs because the drilling industry decides to increase total domestic production and then drills to achieve this collective goal. Of course, the pursuit of profit and price drives drilling activity. From the historical data, there is essentially zero evidence to suggest that even a very large increase in domestic drilling will bring substantially increased energy returns. Since not every part of the US is "mature", its misleading to make a broad statement like that. There are essentially virgin territories within US borders. Historic data doesn't tell you anything about what opening such areas to drilling would bring. The United States is unlikely to ever gain enough new domestic energy supplies from ramping up drilling to significantly change its dependence on imported energy; not at current rates of consumption. Probably true. However, thats not a valid argument against allowing drilling in virgin territories within the US. Toward the tail end of the article, he drags in a "strategic" anti-drilling argument - that drilling more domestically will mean being more dependent on foreign supplies in the future. Of course, he knows most opponents of drilling don't oppose it for that strategic reason, they intend non-drilled territory to stay non-drilled forever, not be banked for future use. And introducing this "strategic" anti-drilling argument seems to fly in the face of the assumption throughout the paper that energy independence is the proper goal we should be shooting for. Just my thoughts.

To: Eric who wrote (3460)	12/15/2008 4:11:52 PM
From: RetiredNow	Read Replies (2) \| Respond to of 86356

Thank you for that post, Eric. Finally, a quantitative approach proving statistically that drilling our way out of dependency is not a good bet. It boils down to Pareto analysis. The single most impactful thing we can do is to conserve more. The next most impactful thing we can do is to substitute alternatives for oil-based fuels. Then the third most impactful thing we can do to achieve independence is drill more. So it's in the top 3, but it is still number 3 behind conservation and alternatives.