Drilling Will Help ... In the Long Run

Drilling for more oil --whether it be in remote areas of Alaska, off the coast of the Atlantic Seaboard, or in the Gulf of Mexico -- is generally regarded as a sure-fire way to boost supplies and lower the cost of gasoline at the pump.

The problem with this scenario is that the impact of such drilling wouldn’t be felt for years, possibly as long as a decade in the case of the northern Alaska oil fields located within the Arctic National Wildlife Refuge.

So Americans will likely have to get used to paying more --much more--for their fuel.

“In the U.S., more drilling will generate more supply. But the time lags are very significant. In the ANWR, even if all the licensing and permits were in place today, it would be 10 years before production affected consumers,” said Tom Wallin, president of Energy Intelligence, which publishes newsletters and data related to the oil and gas industries.

Before a single barrel could be pumped from the ground significant infrastructure would have to be developed for building wells, housing workers and transporting the oil once it’s located.

And don’t expect any of this happen without a sustained fight from environmentalists, who so far have been successful in convincing Congress to keep the ANWR fields off limits to exploration.

The same goes for areas identified by geologists as potential supply sites for both oil and natural gas located off the Mid-Atlantic Coast and in the eastern Gulf of Mexico. 

Wallin believes resistance to drilling may wear down over time, however, if the average price of a gallon of gas surpasses the $4 mark and stays there a while.

After climbing to a record high of $135 a barrel last week, the price of oil has slipped in recent days, slipping below $127 a barrel apparently due to reduced demand. Still, oil has risen about 33% since the beginning of the year.

Several causes have been cited for the surge: increased demand in developing countries like China and India, reduced production by oil producing countries, and speculation by commodities traders.

Whatever the reasons, some analysts believe the price surge may serve as a wake-up call--a call for a common sense approach to America’s energy policies, one that combines fossil fuels, alternative sources and reduced demand.

“We need to be drilling in ANWR and we need to get started yesterday,” said energy policy expert Robert Bryce.

Bryce, who describes himself as an environmentalist,  is the author of the book Gusher of Lies, which argues that the U.S. nowhere near gaining energy independence via alternative fuels.

“We need to increase our domestic production if both oil and natural gas," he said. "We are going to continue using oil and natural gas for decades to come and the environmentalists don’t like that fact. But the reality is that it has taken us decades to get where we are with our consumption of fossil fuels and it will take us decades to transition away from them.” 

According to Bryce, ANWR is home to one-third of U.S. oil reserves and one-half of its natural gas reserves. But for logistical reasons (the same ones cited by Wallin), Congress should focus instead on opening up exploration in the Gulf of Mexico, where the oil can be more readily transported to refineries in Texas and Louisiana.

Moreover, since the media and environmentalists seem to pay more attention to the Alaskan wilds than the Gulf of Mexico, additional drilling in the gulf is more likely, he noted.

Drilling isn’t the only solution, however. Alternative sources need to be pursued.

“It’s not either or, it’s all of the above,” said Bryce. “We’re going to be using more wind and more solar, but were also going to continue using coal, oil, natural gas and nuclear for decades to come.”

What needs to happen is the removal of politics from energy policy, he said.

“You can’t honestly approach energy issues with a partisan agenda. The key questions are how do we keep the lights on and how do we keep the economy moving by providing the energy we need at prices that work.”

He’s not holding his breath waiting for the politics to disappear. But it may not matter. OPEC countries seem in no hurry to increase production despite acknowledged surpluses of oil reserves. That's because they don’t need to. They’re making plenty of money as it is.

Thus, as demand increases across the developing world, the price of energy is going to continue to soar, and the U.S. needs to devise a strategy to meet this reality.

Bryce argues that a strategy of “energy independence” is misguided at this point, since the U.S. is so dependent on fossil fuels. With that in mind, the U.S. should be strengthening its ties in the Middle East rather than seeking to distance itself from oil producing countries.

“The era of cheap energy is over,” he said. “It’s a bitter pill for a lot of Americans, but ultimately it’s one that they’re going to have to accept.”