Obama: "Drilling on Public Lands has Not Decreased"

[monovillage]

Production is entirely up to the lease holders. The leases do not 1) guarantee the leaseholder will find anything nor 2) require the leaseholder to exploit found oil. Leaseholders can sit on their leases hoping the price will go up or that they can sell their leases. The Obama administration proposed rules to penalize leaseholders who failed to show due diligence in utilizing their leases. Congressional Reps screamed bloody murder.

Obama said "drilling" not production. Drilling has gone down on public land by a large amount, Obama either lied or was wrong, it's as simple as that. Judging from his previous track record I have to say he lied.

 

[ElFenix]

Obama said "drilling" not production. Drilling has gone down on public land by a large amount, Obama either lied or was wrong, it's as simple as that. Judging from his previous track record I have to say he lied.

drilling on public land has gone down because, due to fracking, there's a lot of easier to get at stuff on private property in texas, north dakota, and elsewhere.

And in any case, oil companies are hardly likely to pump out enough oil to really drop prices no matter how many leases are sold.

eh, look at the gas market. that's absolutely cratered.

Oh, easily. But would that be a good thing? First, we'd be replacing cheap foreign oil with more expensive American oil, so fuel prices would rise sharply. I don't think doubling of gas prices is at all out of the question, and might be conservative.

Second, we'd be exhausting our own oil much more quickly. If we exhaust our own oil before we're ready to move away from oil, we become much more vulnerable to disruption and blackmail rather than less. We'd be trading long term security for short term security.

Third, we'd need a LOT of new equipment and infrastructure, and its useful life would likely decrease. To pump twice the volume from a given reservoir you need nearly twice the equipment and the reservoir is depleted roughly twice as fast. That's another factor which would tend to increase oil prices. We'd get a lot of good manufacturing jobs, but with the understanding that expertise in these jobs would be self-defeating within a couple decades as we ran out of oil to pump.

Fourth, we'd need fairly draconian rules and/or import/export taxes on oil, otherwise companies would still buy cheaper foreign oil and we'd have no market for our new excess. Besides the inherent dangers of empowering government, we could expect retaliation and World Court actions and sanctions from oil producing countries. That would also lead to more retaliation if we ran short on oil before we could technically and economically move to something else.

your first two words completely disagree with the rest of this post. none of it is easy, and it's not doable in 10 years. the US simply doesn't have the oil to be energy independent from the rest of the world (and by energy independent i mean capable of fueling itself from domestic sources, that doesn't mean we'd be insulated from the world oil market, which IS impossible).

 

[Darwin333]

Many states offer tax credits for CNG vehicles, the feds should get on that wagon too. Fleet operators are already starting to make the switch due to sustained high oil prices.

I would much prefer to see the feds offer incentives to build out CNG infrastructure. Fleets are about the only practical use for it right now because of the lack of places to fill up.

 

[Darwin333]

The issue with being ass deep in the ME has nothing to do with production and everything to do with low cost production.

ME oil is cheap allowing higher margins for oil industry. if you want to blame ME involvement with oil, you have to accept who benefits directly from that.

You are absolutely wrong. Most of our ME oil comes from state owned companies meaning "big oil" isn't getting much of a cut and our reliance on it has everything to do with production. We simply do not have the option to say "Fuck ME oil" today, it would literally drive us into a depression.

 

[Darwin333]

You're assuming we can find enough new oil economically feasible at current rates to satisfy our demand if we simply open up the leases. I'm assuming that to meet our demand - to more than double our current production plus new demand within ten years - we would have to also utilize deposits that are not currently economically feasible, such as tar sands. To use those sources, prices would have to go up, which means they would have to be forcibly decoupled from global prices.

Do you realize that the vast majority of our waters are vastly unsurveyed (at least seriously). We don't have a clue how much untapped oil we have but I'll bet a years pay that we have plenty to do what I am talking about.

Also, where do you get the idea that we need to double our domestic production? I have said, nor implied, no such thing.

We can and have found some massive reserves, but not I think at a rate that would meet our demand without significantly higher prices and/or new technologies. And as we've seen with hydraulic fracturing, these new technologies tend to bring with them significant environmental disadvantages as well.

But the vast majority of our waters (not sure about land) are strictly off limits so no one even looks there. Other places you might spend a few billion dollars to try and develop a proven reserve only to be denied due to some absurd bullshit permit denial from the EPA (recently happened to Exxon I believe in Alaska). As I said earlier, the more we look the more oil we find and oil companies are basically begging to drill it so it must be economically feasible. Before the oil spill we had over half of the deepwater drilling rigs in worldwide existence in the Gulf of Mexico, wanna know why that is? Its because they got oil down there, lots of it. I am not sure about the numbers now, I heard a few were leaving due to the moratorium but I am not sure if they did or not.

To the extent we can find new wells and new reservoirs you are correct. I just don't think we can meet our demand within ten years without significantly increasing the rate at which we draw down reservoirs AND by using reservoirs with significantly higher costs. Lots of known deposits are still sitting idle waiting for prices to rise enough to make extraction feasible.

We can't meet our demand in 10 years, not a chance in hell but that is NOT what I have been arguing at all. I have been arguing about getting off of middle east oil and middle east oil alone. Do you know who are two largest importers of oil are? They are Canada and Mexico (although Mexico keeps going back and forth with SA), I am not looking to replace those imports because we don't need to park 2 or 3 aircraft carrier battle groups off their shores to make sure the oil keeps flowing.

Right now American companies have but 40% IIRC of our market, so they exploit the cheapest reserves sufficient to meet that demand. They will pump as much oil as possible from those deposits, or at least as much oil as possible without significant new capital investment, but they aren't going to develop new deposits which they believe to be so expensive to recover that their ROI will suffer. It's simply cheaper to buy imported oil. For instance, when a few years ago Saudi Arabia returned to our #2 supplier and Mexico dropped to #3 it wasn't because Mexico ran out of oil, but rather that Mexico ran out of sources exploitable at current market prices. If you're producing oil at $40/barrel and you can potentially produce more at $60/barrel, why do so when you know Saudi Arabia can produce it for $5/barrel? When you're making damned good money you don't get into a price war you know you'll lose. This is why I don't think American companies would produce enough new oil to make us energy dependent without regulatory and tax structures which make it economically feasible for them. Why would they reduce their ROI & risk a devastating price war? Certainly oil companies would love to have more freedom to look in more places and fewer and less restrictive regulations, but freedom to look doesn't necessarily translate to finding new, economically feasible deposits. There's a reason we found the massive, cheaply obtained oil fields of Texas and Oklahoma in the early parts of the least century; we were looking very, very hard and we found the easily obtained fields. There are small oil fields all over - for instance, Tennessee has a bunch, most of which were found in the seventies or earlier and not feasible to work until the last couple of decades - but we've probably found most of the large and cheaply recovered oil reservoirs in America.

That is just so wrong I don't know where to start.

Ok, so Saudi Aramco has a cost per barrel of $5 and Mexico has a cost per barrel of $60 to produce oil. You are saying it is cheaper for Mexico, or us, to purchase oil from Saudi Aramco? Exactly what makes you think that Saudi Aramco is passing the savings on to us, them, or anyone? They are charging us market rate for it regardless of what it actually costs them to produce it. If oil is at $100 a barrel and it only costs them $5 a barrel, we still pay $100 for that barrel of oil. This isn't a cost plus operation at all, we are dealing with state owned foreign entities. So if Mexico could produce oil at $60 a barrel they would be foolish to purchase oil for $100 a barrel from Saudi Aramco when at the very least that extra $40 a barrel could be going into their own economy versus Saudi Arabia's.

Just because the oil is cheaper to produce does not mean you will be able to buy it cheaper. It just means that they make more money when you do buy it.

 

[werepossum]

drilling on public land has gone down because, due to fracking, there's a lot of easier to get at stuff on private property in texas, north dakota, and elsewhere.

I'd say technically it's easier to get new oil on public land than to get oil by fracking on private land; fracking is inherently expensive and difficult, with serious potential environmental effects. It's easier mainly because the federal government has less control and less opportunity to arbitrarily kill your project after you've invested millions.

eh, look at the gas market. that's absolutely cratered.

Good point. I'll revise my statement; oil companies are hardly likely to intentionally pump out enough oil to really drop prices no matter how many leases are sold.

your first two words completely disagree with the rest of this post. none of it is easy, and it's not doable in 10 years. the US simply doesn't have the oil to be energy independent from the rest of the world (and by energy independent i mean capable of fueling itself from domestic sources, that doesn't mean we'd be insulated from the world oil market, which IS impossible).

I think we have plenty of oil to become energy independent within ten years, given a Manhattan Project-style commitment. Subsidize conversion to natural gas, subsidize solar and wind, streamline all permitting and licensing. It would require legally banning imported oil after ten years, and would require legal contractual financial commitments and guarantees to oil companies, who otherwise probably couldn't fund such an explosion of equipment and personnel and who certainly wouldn't risk doing so on legislation subject to be changed by the next Congress.

I actually meant we easily have enough oil to do it, not that doing it would be easy (or even wise) as I pointed out in the rest of that paragraph. I wasn't clear, which is why the two parts don't seem to fit.

 

[werepossum]

Do you realize that the vast majority of our waters are vastly unsurveyed (at least seriously). We don't have a clue how much untapped oil we have but I'll bet a years pay that we have plenty to do what I am talking about.

Also, where do you get the idea that we need to double our domestic production? I have said, nor implied, no such thing.



But the vast majority of our waters (not sure about land) are strictly off limits so no one even looks there. Other places you might spend a few billion dollars to try and develop a proven reserve only to be denied due to some absurd bullshit permit denial from the EPA (recently happened to Exxon I believe in Alaska). As I said earlier, the more we look the more oil we find and oil companies are basically begging to drill it so it must be economically feasible. Before the oil spill we had over half of the deepwater drilling rigs in worldwide existence in the Gulf of Mexico, wanna know why that is? Its because they got oil down there, lots of it. I am not sure about the numbers now, I heard a few were leaving due to the moratorium but I am not sure if they did or not.



We can't meet our demand in 10 years, not a chance in hell but that is NOT what I have been arguing at all. I have been arguing about getting off of middle east oil and middle east oil alone. Do you know who are two largest importers of oil are? They are Canada and Mexico (although Mexico keeps going back and forth with SA), I am not looking to replace those imports because we don't need to park 2 or 3 aircraft carrier battle groups off their shores to make sure the oil keeps flowing.




That is just so wrong I don't know where to start.

Ok, so Saudi Aramco has a cost per barrel of $5 and Mexico has a cost per barrel of $60 to produce oil. You are saying it is cheaper for Mexico, or us, to purchase oil from Saudi Aramco? Exactly what makes you think that Saudi Aramco is passing the savings on to us, them, or anyone? They are charging us market rate for it regardless of what it actually costs them to produce it. If oil is at $100 a barrel and it only costs them $5 a barrel, we still pay $100 for that barrel of oil. This isn't a cost plus operation at all, we are dealing with state owned foreign entities. So if Mexico could produce oil at $60 a barrel they would be foolish to purchase oil for $100 a barrel from Saudi Aramco when at the very least that extra $40 a barrel could be going into their own economy versus Saudi Arabia's.

Just because the oil is cheaper to produce does not mean you will be able to buy it cheaper. It just means that they make more money when you do buy it.

Sorry, I misunderstood what you were saying. I thought you meant energy independent, which is I think technologically possible but which would require a huge commitment and investment. Obviously a commitment to getting off ME oil is much simpler and in fact, could be done with legislation today. Still three problems though: legal challenges, foreign policy, and cost. Because of our free trade agreements, banning such imports would not be allowed; we only get away with it for Iranian oil because we got other countries to go along. On foreign policy, we have any juice at all with Middle Eastern nations other than Israel because we buy their oil, so we could expect them to form a power block with China and South American nations to counter American influence. And of course cost would go up; our oil companies would have to buy North American oil even when it's higher, whereas other nations would be free to buy North American oil or walk away to oil from other regions. If you artificially lower supply, you artificially increase price. None of that means it isn't worth doing, just pointing out that there are barriers here too.

My comments on price were predicated on my assumption that you were speaking of using only domestic oil and were two-fold. First, that we would be unable to use only domestic (American) oil without using some sources which would be more expensive to produce. And second, that American oil companies would be unwilling to exploit these more expensive sources unless freed from competing with other, cheaper sources of oil.