You make an interesting point about the cost benefit analysis. If I was a member of Congress, one of the things that I would be doing when listening to the drilling discussions would be to have a calculator out so I could ask questions of my colleagues like - do you realize how much that “small amount” of oil might be worth to us?

I would also be pressing my staffers to be tough negotiators to make sure that the current owners of the oil reservoirs - the American people - are well represented in the negotiations over royalties and taxes. That was not the case when we had people in the Department of the Interior who essentially gave our oil in many rich Gulf of Mexico reservoirs to the majors without demanding any cut of the production. That decision is costing our treasury tens of billions of dollars each year.

WRT Lovins - I think you need to understand a bit about the man before trusting him as an energy prognosticator - he is a self admitted two time college dropout without an earned degree who has called himself a physicist and Chief Scientist for more than 3 decades. He also recently told Amy Goodman on Democracy Now - “You know, I’ve worked for major oil companies for about thirty-five years, and they understand how expensive it is to drill for oil.”

I respect the technical efforts of oil companies but not their business practices. Anyone who has worked for them for 35 years probably understands that their product is more profitable when it is most painful for all of the rest of us.

Rod Adams
Editor - Atomic Insights
Host - The Atomic Show Podcast

The paper I reference above uses a USGS report that estimates the ‘technically recoverable’ oil in ANWR. The mid-range estimate is about 7.7 billion barrels. Another recent CRS report based on the same USGS data has a higher mid-range estimate of 10.3 BBO. Is this a lot or not? I guess it depends on your metric. At current U.S. consumption levels it represents somewhere between a year and year-and-a-half of U.S. consumption. (Of course it will come out in a much slower trickle over a longer period.) But the point of the post is not how much is there per se, but its economic value.

Regarding where the oil gets sold, it really doesn’t matter. Remember, oil is a global commodity market. The oil companies could sell wherever they wanted. But if the global price is, say, $100 then I guarantee that American refineries can find someone somewhere in the world who will trade them a barrel of oil for $100 cash money. (Yes, ok, the point about oil being a global commodity might not apply if we decided to nationalize all our energy resources and companies but I think the odds of this happening in the near future in the U.S. are very remote. Further, even if it happened then presumably this would be done exactly so that we could keep all our oil resources for ourself and ignore the opportunity costs that a private business would consider.)

Of course in 10 years we could have very different cars. This is indeed the major problem that I had with Frankel’s post: just because oil is really expensive now does not mean it will be for all time. But I think that most people would agree that our car fleet (and oil demand) is more likely to be radically transformed in 20 years than in 10 (or indeed generally in X+10 years rather than X years). Like Rich mentioned in his previous post that I linked above, you could think about the oil like a hedge: set up to drill over the next few years, but only allow actual extraction if prices were above a threshold.

And you are in good (or at least numerous) company in your preference for Lovins. Frankly it is an honor to know I make it onto the same list of “people whose opinions you read about oil”.

And even if there is sufficient oil for a bunch of years, why would the oil companies sell to the Americans with the weakening dollar? why not sell to the asians?

And by 10 yrs why couldn’t we have diff types of cars? And what about other biodiesels like jatropha?

I’d rather listen to Amory Lovins on this topic.

All property rights (to a greater or lesser extent) derive their value from “political decree”. One of the reasons the price of carbon collapsed first time around is that businesses didn’t have confidence in the supply of permits. So the rules for this phase of the ETS are much tighter (though there are still safety valves and polluting companies will naturally continue to lobby for their interests).

What your post boils down to is a lack of confidence in the EU ETS and a sense that Carbon Retirement - in its very modest attempts to game a cap-and-trade system that traded £21bn in the last 6 months - might bring the whole edifice tumbling down. Given the political and economic challenges that would be raised if that happened, I might put that in the category of a “nice problem to have”.

Interesting reference to this topic from Lou Grinzo over at the Collective. He refers to a Jim Kingsdale piece about the value of starting the process immediately of accessing oil we will need ten years hence…

http://theenergycollective.com/blog/LouGrinzo/site/posts/?bid=25059

Take care!

m.