Joseph Romm writes in to tell us that a study conducted in 2007 by the Department of Energy's Energy Information Administration scoffs at the notion that offshore drilling will relieve the pressure on oil prices any time soon, or ever.
The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher -- 2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case. Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.
File that prediction along with today's Wall Street Journal story noting that it would likely be as long as a decade before any oil starts flowing, and you can only conclude that even my optimistic scenario, posted yesterday, in which a mere commitment to drill pops the speculation bubble, seems highly unlikely.
So, if more drilling would have neither a short term nor long term significant impact, why, really should we bother? There's only one good explanation I can see, and that is that Western oil companies stand to make huge profits from selling whatever new oil they can pump offshore, ten, twenty, or thirty years from now. Funny, you'd think they'd be satisfied by having somehow managed to beat out the Russians, Chinese and Indians for lucrative oil concessions in Iraq.
But the best news for oil prices today comes not from Iraq or John McCain's campaign, but from China. The Chinese government announced that as of midnight Thursday, domestic gasoline and diesel prices will jump 17-18 percent. In contrast to the U.S., where Americans have been radically changing their gasoline consumption habits in a rational response to price hikes, in China, drivers have been shielded by state subsidies from having to cut their consumption. If global demand and supply are to reach equilibrium, such subsidies have to end. (And sure enough, oil futures prices dropped on the news.)
And one last note: My post yesterday received a link from Real Clear Politics, a clearinghouse for political news that is apparently quite popular with readers of a more conservative bent than the typical Salonista. I especially enjoyed the following comment:
[Leonard offers] absolutely no proof to support the statement "Unrestrained burning of fossil fuels will continue to raise global temperatures and contribute to rising sea levels and devastating extreme weather events." Not only is it a Marxist lie, it is impossible for man is not God and he cannot change the Heavens.
I beg to differ. The Heavens are ours to do with what we please. But we'd better watch our step, or God might get annoyed.