A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.
Snapshot for October 25, 2000
Tackling the tradeoffs in oil consumption
The recent spikes in world oil prices along with the ongoing presidential and congressional races have combined to make America’s energy policy a significant political issue for the first time in two decades. George W. Bush and others are calling for increased domestic oil production through development of oil reserves located in the Arctic National Wildlife Refuge (ANWR) in Alaska, one of the last large pristine areas on earth. The question is whether it is worth invading this refuge to extract the oil that lies beneath. A closer look at the actual oil potential of the refuge shows that the answer is clearly “No.”
An assessment by the U.S. Geological Survey concluded that there is a 50% chance that there is about 6.1 billion barrels of economically recoverable oil underlying the refuge, and a 95% chance that that value is actually about 3.4 billion barrels. While this may sound like a lot, exploiting these resources would not help free the U.S. from oil imports.
If Congress gave its approval today, no oil would come out of ANWR until about 2010, when it would provide a miniscule 25,000 barrels a day or about 0.15% of the projected oil demand.
The chart below shows projected U.S. oil production, consumption, and imports in 2020. With daily oil consumption of almost 17 million barrels per day, about 11.5 million (68%) will be imported, with a little over 5 million produced domestically. Using the U.S. Geological Survey’s mean estimates and factoring in a moderate rate of development, ANWR could offset imports of about 475,000 barrels per day. If the refuge only contains the more likely amount of about 3.4 billion barrels, the 2020 production potential is closer to a barely noticeable 300,000 barrels per day.
While it is true that the U.S. needs to address its growing demand for energy, drilling in the Arctic National Wildlife Refuge will do little to achieve this, and the small gain will come at a tremendous cost. A more honest and level-headed approach to meeting America’s energy needs will require a comprehensive plan that includes development of renewable energy sources and enhancing energy efficiency, not a get-rich-quick scheme that stands to benefit a handful of oil executives and their friends.
Sources:
U.S. Energy Information Agency, “Potential Oil Production from the Coastal Plain of the Arctic National Wildlife Refuge: Updated Assessment” and “Annual Energy Outlook 2000;” U.S. Geological Survey “The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska,” and “Economics of Undiscovered Oil in the 1002 Area of the Arctic National Wildlife Refuge.”
This week’s Snapshot by EPI economist James P. Barrett.
Check out the archive for past Economic Snapshots.
