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Energy Non-Crisis


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Twitch, I did watch nearly 45 minutes of this because you asked me to, and I went in with an open mind. I'll admit that I would really, really, really like to believe him. He is quite compelling. However, it seems that everything he says is based on heresy gleaned from the roughnecks who built the Alaskan pipeline back in 1974. Unfortunately, I'm guessing that the "chaplain" of the pipeline probably didn't get all the info, or perhaps got just enough to draw some erroneous conclusions from the guys who didn't even have all the information thirty four years ago. Sadly, his "facts" probably aren't and conspiracy theories like this one fly about as well as rocks (Congress has spent the last 35 years quietly covering up an oil strike of this magnitude? Uh, what?).

I think I believe the guys at Exxon/Mobil who say there is only 2 years of oil instead of an ordained minister who took a field trip thirty-seven years ago. If anyone has incentive to lie about it, I'd say Exxon/Mobil would be #1 on the list with a lot to gain from a big score. Sadly, even Big Oil seems agree with Dave and his experts.

Also, to have 200 years of oil in there, at our current rate of consumption, it would have to be roughly 90 times the size of Saudi Arabia, or about 6% of the volume of the entire earth. I don't think we would have missed something like that.

I did a quick Google for Lindsey Williams. This is from his official biography page:

<span style="font-style: italic">Lindsey Williams, who has been an ordained Baptist minister for 28 years, went to Alaska in 1971 as a missionary. The Transalaska oil pipeline began its construction phase in 1974, and because of Mr. Williams' love for his country and concern for the spiritual welfare of the "pipeliners," he volunteered to serve as Chaplain on the pipeline, with the subsequent full support of the Alyeska Pipeline Company.

Because of the executive status accorded to him as Chaplain, he was given access to the information that is documented in this book.</span>

That's really not filling me with confidence. Sorry.


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A lot of people think ANWR is the perfect long-term solution, but it's simply not true. Everyone wants to blame environmentalists and the native wildlife for not going to Alaska to get oil. Believe that if you want, but it isn't a political issue. I sincerely wish the talking heads in the media would stop trying to drive a wedge between "Us" and "Them." I'm so sick of this nonsense in every facet of our lives as Americans, as if one side has the answers and the other side is comprised of lunatics and morons. Red state, blue state, Democrat, Republican, liberal, conservative. Enough already! Everyone seems to agree that all politicians are ineffective, so why is there this finely honed hatred of "the other side" all over the place? Damn it, it's ruining our country.

But I digress.

The truth is that <span style="font-style: italic">at the moment</span> it is not economically viable to go up there and get the oil. Even at $120/barrel, it's still cheaper to buy it from other sources. Sooner or later, oil prices <span style="font-style: italic">will</span> climb to the point where that oil is worth retreiving, and I have every confidence that someone <span style="font-style: italic">will</span> go get it despite the potential envrionmental hazards. We'll just have to go get it at some point to keep our economy running.

However, this is not the time to do that. Why should we go get it now and end up selling 2/3 of it to China and India? Any oil we find there goes on the world market regardless of where it came from. Now sooner or later, the Middle East is going to make a great sucking sound and there will be no more oil coming from that source. If we're smart, we'll still have ours at that point, and they can go back to herding goats in the desert. Getting it now will help nothing in the short term, give the Middle East even more power over us in the medium term, and will hurt us big time in the long term. What if we use it all up today and the Arabs cut us off tomorrow? What then? Ooops, we used it up when we didn't really need it.

An analogy: I once considered doing something called "The Race to the Top of the Earth" which was basically driving as far north as possible. One of the things they tell you to bring is dog food. Why? <span style="font-style: italic">Because you won't eat it until you're starving.</span> We aren't starving yet, no need to eat the dog food. There are still plenty of potato chips and hamburgers laying around.

In addition, prices won't drop either on the futures market nor at the gas pump because it will not have a significant impact on the total supply of oil available on the world market. Your gas is still going to cost $4+/gallon for a variety of reasons, not just the unavailability of ANWR.

And you'll have to define "beaucoup." According to the US Geological Survey, there are ~10.4 billion barrels in ANWR. Those are some mighty big numbers and I'd definitely call it "beaucoup." But right now, we use <span style="font-weight: bold">20.5 million barrels a day.</span> Do just some bone-simple math and you can see almost the entire picture:

10.4 billion / 20.5 million = 507.32

So, using the offical estimates, there's 20 months of oil, and it's not even particularly high quality oil at that. It's much thicker and more expensive to refine than the stuff coming from other sources. But nevermind that. Let's go back to the math.

Just for kicks, let's use the most wildly optimistic estimates that I could find anywhere. Sean Hannity, surely a reliable source if you're merely looking for the biggest, most exaggerated number possible, predicts 16 billion barrels. That number is <span style="font-style: italic">still only 784 days, or <span style="font-weight: bold">just over 2 years. </span></span>That's also assuming that our consumption won't grow (it will) and assuming that we keep it all for ourselves (we won't). Worth the investment in infrastructure, construction, transportation, processing, clean-up, raw materials and personnel salary to get 26 months of oil? Not even if you're the most wealthy oil company in the world.

Maybe someday it'll happen. The oil companies know about making money, and if they could do it here and now, of course they would. It's intellectually dishonest to suggest that the non-profit environmentalists have more resources, money and influence in Washington than the oil companies, especially with oil company owners in the White House for the past 8 years.

But enough with the political BS about Al Gore and his liberal, tree-hugging minions keeping us from having $1/gallon gas again. Those days are long gone, and no matter what happens, prices are only going to go up from here. There is no magic bullet. We'll have to adapt, which is what Americans do best (well, when they're not blaming each other for problems that we could solve together).

Of course, you can also feel free to dismiss these simple facts and continue to blame phantom enemies like the snow elk and polar bears for the situation. Americans love to place blame.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Restorer32</div><div class="ubbcode-body">Let's see Matt. If there are 16 billion recoverable barrels of oil in ANWAR, even at $100/barrel we're talking about 1 Trillion 600 Billion bucks. That's $1,600,000,000,000. Somehow I think Exxon might be interested! </div></div>

Not if it's going to cost them $2 trillion.

Another factor to consider is that it takes time to put the infrastructure in place to get this stuff up and down here. The most optimistic estimates state that if ANWR were opened for total rape tomorrow, it'd take at least 10 years before anything more than a trickle would get here. Of course if it is opened it won't be for total rape, and the rate of flow will be slower and take longer than that to get here.

ANWR isn't really a factor. It's used to manipulate public opinion through friendly media outlets (guess who!), but that's about it. Some people's oil addiction makes them more amenable to manipulation than others (some apparently even like it), which is why these kinds of threads keep popping up.

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<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Restorer32</div><div class="ubbcode-body">Let's see Matt. If there are 16 billion recoverable barrels of oil in ANWAR, even at $100/barrel we're talking about 1 Trillion 600 Billion bucks. That's $1,600,000,000,000. Somehow I think Exxon might be interested! </div></div>

That's a good point and I hadn't thought of working the math that way. I don't know if I have an exact answer for that. However, you are making some assumptions:

1) That there really are 16 billion barrels. Exxon puts their own estimate at the 10.4 number, but nobody will know until they get there and start pumping. It's going to be a big gamble, because the low estimates are around ~3 billion barrels (which is statistically more likely than the 16 billion score). It'll cost more than $300 billion to get the oil, and that's a big risk to take if the deposits are smaller than we think.

2) That it is all equally accessible. The USGS has a report that basically says (and this is obvious) that only a fraction of the oil is recoverable at any given price. As it becomes more valuable, it becomes economically feasible to extract the more difficult-to-reach stuff. But we can't assume that we can get all the oil with an equal investment, nor that at today's prices it is 100% viable.

3) That the oil company gets to keep all the money. ANWR is federally owned. You and I will get a slice of that pie, and probably a big one. Oil companies pay royalties on each barrel of oil they pump from private or government-owned land. Mobil claims their "standard" royalty is 16%, but it is 33.3% in the Rocky Mountain area, with 37.5% in Wyoming and ranging up to California's royalty of 61.1% (!).

Then there are the acquisition costs and capital investments required, surely billions of dollars over a long period of time. They're going to have to build a city in one of the most remote places in the country, power it, ship in raw materials (using petroleum-powered vehicles), making roads and/or railways, and pay the thousands of people living there to do the work. In addition, the oil strikes are scattered throughout a very wide area, so it will be hard to have a single "home base" for the whole thing. It might take several small cities instead of one larger one.

There are 42 gallons of oil in a barrel, which I didn't know until I started looking stuff up today. At $100/barrel, the cost of just the raw materials to make a gallon of gas is $2.38. Add in refining costs, transportation, marketing, storage, etc., and we're talking pennies per barrel of profit when the gas finally comes out of the pump. There's a break-even point on some oil company accountant's spreadsheet somewhere, and at $100/barrel and $3.50/gallon, they aren't willing to risk such an investment because of all the unknowns.


Thanks for making me think about this stuff--I learned a lot looking around today. Clearly I don't have all the facts and I'm willing to admit that, but what I read from mostly government agencies pretty much supports the bad economics of the project at today's prices.

And, with all due respect to the anti-environmentalists, I did discover that there are substantial environmental forces allied against the project, although one of the biggest opponents to drilling seems to have sold out for a $1000/year/person payout from the oil companies currently digging in Alaska.

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Matt..I agree with you 100%. The guy in the video is just a preacher, not an engineer. World consumption of oil is rapidly increasing. Let me tell you the oil companies would be pumping it out of the ground and making money if the supplies were there. I said many years ago we should cap our wells and use up their oil. The day would come when we had it and they didn't. The situation boils down to we need to develope another energy source and dare I say curb the world population growth.

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