More Hot Air Over the Arctic
Harper's Magazine, May 11, 2006
Gas prices have been rising and could go considerably higher, especially given the instability in the world's major oil‒producing regions. Even if supply stays on track, increased demand from China and India will put pressure on oil prices for decades to come. The Bush Administration's response to this situation remains the same: drill for oil in the Arctic National Wildlife Refuge. The pro-drilling party line goes something like this: if we just put aside our environmental worries and start drilling in the Arctic Refuge, there will be enough oil to replace our imports from Saudi Arabia, we can cut our “addiction to oil,” and—because so much oil will then be produced domestically—gas prices will go down.
But even if you don't consider the effects of drilling on the environment, these claims are totally without merit.
First, the arithmetic isn't right. The United States gets about 1.5 million barrels of oil a day from Saudi Arabia, but the “mid-point peak” Arctic production estimate from the Energy Information Administration is one million barrels a day. Plus, it will take at least ten years for production to reach that peak.
Second, the price of oil in the United States depends on not only the U.S. market but the world market. If we had started drilling in the Arctic ten years ago, so that the refuge was currently producing oil at its one-million-barrels-a-day peak, that would have added approximately 1.2 percent to today's daily oil production of 85 million barrels. This might have been enough to knock down prices by a few dollars a barrel, but it would not have removed the specter of $3-a-gallon gas—at most, Americans could save a few cents per gallon at the pump.
It's interesting to note that as a result of the instability created by the Iraq war, oil production in Iraq is down by approximately 900,000 barrels a day from its pre-war level. Thus, the potential production from the Arctic Refuge would be just a bit more than enough to replace the oil production lost because of the invasion of Iraq.
Which brings me to my third point. Proponents of drilling imply that there is some benefit in getting our oil from domestic sources as opposed to importing it, but the opposite is true. Today, we can freely buy oil on the world market, so there is no benefit to using up our domestic reserves. But it's very possible that at some point in the future the United States will be cut off from foreign oil for a period of time, at which point we would have the option of using the oil from the Arctic Refuge, if it is still there. National security considerations provide an argument for leaving as much oil as we can in the ground, in case the United States finds its international supplies cut off—not for rushing to drain the refuge. Drilling into the Arctic today would be like putting your spare tire on your car before you have a flat.
This is not the first time that bogus arguments have been advanced to promote drilling in the refuge. Back in 2001 proponents of drilling claimed that the oil production from the region would create up 750,000 new jobs. They were only off by 700,000. In 2001, with the Center for Economic and Policy Research, I did a short analysis of the study on which this claim was based and showed that a more realistic estimate of potential job creation was in the neighborhood of 35,000 to 50,000. The inflated jobs claim quickly disappeared from the public debate when the economic forecasting firm that authored the original study refused to stand by its numbers. Let's hope that these new and equally specious arguments for drilling in the Arctic Refuge disappear just as quickly.
But I doubt that pro-drilling arguments will ever go away completely. After all, denial is one of the hallmarks of addiction; and in advocating Arctic drilling as the treatment for our oil addiction, the Bush Administration is proving itself to be in deep, deep denial.
Economist Dean Baker is the director of the Center for Economic and Policy Research. His most recent book is The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, available as a free, downloadable e-book and in paperback. He blogs at Beat the Press.