Should we be holding on to all that oil until we really need it?

In a comment to my post on offshore drilling, odograph writes (and my Dad agrees):

If I could ask reporters to do one thing, it would be to always frame coastal reserves in terms of current consumption.

There is a strong (predictably irrational?) tendency to only mention the one-time gift this oil might give us in prices, and not where that will leave us, after.

There is a strong (predictably irrational?) tendency to assume that all those technologies we’ve been dreaming of for 30 years (hydrogen and electric cars?) will suddenly be there when this oil gives out.

There are environmental arguments, but the strongest ones I think are based on prudence and caution.
… as they sometimes say in energy circles “use their oil first.” We might need ours in the future WAY more than we do now.

Andrew Leonard sounded a similar note in his blog Wednesday:

[W]hat is the truly “conservative” position on offshore drilling, or energy policy in general? Recklessly exhausting all available resources now, and letting the future take care of itself — or conserving those resources, investing carefully for the future, and thinking about the long term? Where does prudence reside — in attempting to shave a few pennies off of gas prices now, or on planning on how to cope with high gas prices for the foreseeable future?

My first thought: Couldn’t you do both?

I really don’t know what the right answer is here. Opening the Outer Continental Shelf to drilling would, unless there are some huge reserves out there that the geologists have entirely missed, have only a modest impact on U.S. oil production and almost no impact on oil and gas prices (and this wouldn’t happen for decades). It would take some of the money now flowing from U.S. consumers to the Persian Gulf (and worse, Canada) and divert it to domestic oilworkers, domestic oil-company executives and shareholders, and state and federal government coffers. Those are the positives.

The environmental negatives are the risk of spills (which I would think is small but not vanishingly so), and the despoiling (for several decades; not forever) of the views of beachgoers and coastal property owners. Which I’m afraid I just can’t get all that excited about. Of all the environmental threats our nation faces, these are on the petty, NIMBYish side.

Then there’s the much more interesting argument that we should conserve these oil resources until we really need them. A complicating factor is that, even if the federal government starts okaying offshore leases willy nilly today, it will be more than 20 years before production from them really gets up to speed. So the question is, will we need the oil more 20 years from now than we will 40 or 50 years (or more) from now? I have this suspicion that we will–if we haven’t figured out a replacement for oil 40-50 years from now, we’re toast. Twenty years from now we might still be transitioning ourselves out of the oil era and a little extra production might help ease the switch. But that’s nothing but a guess.

Apple CEO Cook Gives Up $75M in Stock Dividends

NEW YORK — Apple CEO Tim Cook is giving up $75 million in dividends on restricted stock that the company is awarding to all of its employees.

In a filing with the Securities and Exchange Commission on Thursday, Apple Inc. said that Cook requested that his restricted stock units not receive dividends. The dividends that Apple workers are getting amount to $2.65 per quarter for each restricted stock unit held. The shares are not normally eligible to receive dividends, so Apple’s decision is a perk for its employees.

odograph

“So the question is, will we need the oil more 20 years from now than we will 40 or 50 years (or more) from now? I have this suspicion that we will–if we haven’t figured out a replacement for oil 40-50 years from now, we’re toast.”

That’s a pretty good argument … but isn’t part of the “drill now” problem one of social focus? When we commit to short term offshore leases, are we solving the problem or postponing it?

Perhaps we are postponing it while we wait for the calvary to ride over the hill (with electric or hydrogen cars). In my opinion, we aren’t really engaging with the idea that we might have to shepherd this resource for longer than we hope.

(It was fun to say “thanks, Dad” without knowing for sure who’s Dad it was
That Anonymous Dude

“If I could ask reporters to do one thing, it would be to always frame coastal reserves in terms of current consumption.”

Would it be annoying of me to point out this post doesnt do this part either (tho the rest of it was interesting)?
Justin Fox

Wildly annoying.

I had sort of outsourced that part to the link on the impact on production and prices, which points to an Energy Information Administration report that says opening up currently off-limits areas of the Outer Continental Shelf to drilling would result in about 200,000 barrels a day of oil in added production by the mid-2020s. Current U.S. production, if I’m reading my EIA reports correctly, is about 5 million barrels a day. U.S. consumption is about 20 million barrels a day. Global consumption/production are in the 85 million barrel per day range.

So yeah, that ought to solve all our energy problems right there.
That Anonymous Dude

see that really really helps to put in perspective..every reporter should quote these stats on all posts regarding this topic, and something similar on the strategic reserve type articles or anything on anwar.

You can quote below if you want:
“So when the McBushRepublicanNationalMoronParty says that drilling the ANWAR/Offshore reserves is necessary, what they really mean is that in 12 years you might pay 10-20 cents less a gallon for about a couple of weeks before it all runs out. As opposed to looking for real solutions or just plain saying ‘hey this sucks and it ain’t gonna get any better so best get rid of that F-150 and McMansion…’ Also, in return for essentially nothing you get increased odds of another man-made environmental disaster, hope you dont live in florida or alaska…’
Sean DeCoursey forgot his password

I have to come solidly down on the side of drill now because we’ll really, really want that stuff in 10-20 years while we’re at max demand and minimum transition. As it runs out demand will drop and transition will increase. It’s a good lubricant against societal unrest and economic harm while the economy is shifting over.
SpotWeld

Sean DeCoursey, you write As it runs out demand will drop and transition will increase.

Isn’t that a contradiction? I would assume that increased demand (above supply) is the stimulus that motivates transition.

If you remove the demand (and high prices), then the potential rewards in investment in the new technologies decreases, slowing the rate of transition.

The general idea above seems to be; buy their oil now, while it’s less expensive and sell them ours later, when it’s more expensive. Buy low, sell high. (And then make them dependant on our “transitioned” technology when they’re forced to switch over too.)

It’s very important to make sure that the US does not lag China or India in technology that will take us off petroleum; otherwise we’ll just be switching from foreign oil, to foreign ethanol.
Dad

Where I come down on this is, “why the hectic rush to reduce oil prices?” If we’re going to see changes like better fuel efficiency cars, people living closer to their work, alternative energy sources and the like, someone is going to have to suffer a little pain if the market forces are going to work as intended. I’ve been working in synthetic fuels for 25 years (admittedly we did not have global warming on our agenda) and we were always faced with the fact that we could be competitive only if oil prices rose significantly above what they were currently. Now we are at a point where some of these alternatives have a chance.

If anyone thinks that hydrogen cars and solar energy are going to make for cheaper transportation costs they have their head in the sand. Cleaner, yes. Less dependent on imports, yes. Cheaper, no.