Can We Drill Our Way to Energy Security?

Although oil prices have receded from their all-time high of $145 per barrel, the U.S.’s energy security situation remains disturbing. Oil is still the sole strategic commodity in the U.S.’s transportation sector, and I have previously addressed the looming problems related to our exclusive reliance on oil. It is no secret that prices will rise again, although the U.S.’s fledgling alternative energy industry may be destroyed before they do. Nor is it a secret that our oil dependence means that we are “paying for both sides in the War on Terror.” And while the U.S. suffers through its worst economic crisis since the Great Depression, terrorists are aware that a successful catastrophic attack on one of Saudi Arabia’s major production hubs could be a virtual knock-out punch in their war against the West.

Against this backdrop, a large number of commentators advocate increasing our domestic drilling–for example, exploiting offshore oil resources or those in the Arctic National Wildlife Refuge (ANWR). This policy briefing examines whether we can drill our way to energy security, and concludes that commentators should not overstate the benefits: exploitation of conventional fossil fuel resources within the U.S. will neither end nor seriously ameliorate our strategic vulnerability. Domestic drilling is not necessarily a bad idea, but we should not lose sight of the need to diminish oil’s importance as a strategic commodity. Contrary to the claims of some skeptics, we can do so.

The Arctic National Wildlife Refuge, and Other Domestic Resources

Many drilling proponents point to the U.S.’s failure to exploit energy resources in ANWR as one of the clearest failures of our current energy policy. While the amount of oil recoverable from ANWR is not known, an objective look at the research done on its resources makes clear that drilling there will not change our current strategic weakness.

The Energy Information Administration (EIA) has provided the best, mean, and worst-case estimates for ANWR’s resources. Under its “high resource” case, ANWR will allow for cumulative oil production of 4.3 billion barrels; its mean estimate is 2.6 billion barrels, while its “low resource” case projects 1.9 billion barrels. Some more optimistic observers have claimed that around 10 billion barrels of oil can be extracted from ANWR. But even if that high estimate were accurate, ANWR drilling would not translate into energy security.

For one thing, not all of ANWR’s oil would be recoverable at once: only a certain amount can be extracted per day. Under the EIA’s high resource estimate, ANWR’s production would peak at 1.45 million barrels extracted per day in 2028. (In the low resource case, production peaks at 510,000 barrels per day, while in the mean case it reaches at 780,000 barrels per day.) The U.S. currently consumes around 21 million barrels of oil per day, with over 65% of that total imported from foreign countries. Thus, even if all the oil extracted from ANWR were sold domestically, the EIA’s most optimistic estimate has it providing a little under 7% of current consumption. While this is not negligible, it also does not amount to a solution to our energy problems.

Neither drilling in ANWR nor other kinds of domestic exploration will change basic rules of economics. The United States has about 30 billion barrels of proved reserves. (Proved reserves are not the same as estimates of technically recoverable crude oil resources: the latter was estimated to be 174.67 billion barrels in late 2006.) In contrast, the five Middle Eastern countries with the most proved reserves–Saudi Arabia, Iran, Iraq, Kuwait, and UAE–have over 700 billion barrels. Even if domestic exploration is spectacularly successful, OPEC will still set the worldwide price of oil. While drilling in ANWR would influence that price by increasing the world’s supply, its overall impact would be relatively marginal. The EIA has estimated that exploiting ANWR’s resources would decrease the price of oil by between $0.41 and $1.44 per barrel, with its peak influence on prices coming at some point between 2025 and 2027.

Rumors of the Bakken Formation

Some currently circulating rumors about domestic oil resources have provided false hope about our ability to drill our way to energy security. For example, a recent e-mail of unknown origins that has been making the rounds contains some strong claims about the Bakken Formation, which has been described as “an interbedded sequence of black shale, siltstone and sandstone that underlies large areas of northwestern North Dakota, northeastern Montana, southern Saskatchewan and southwestern Manitoba.” The aforementioned e-mail claims that exploitation of the Bakken Formation’s resources “has the potential to eliminate all American dependence on foreign oil. The Energy Information Administration (EIA) estimates it at 503 billion barrels.”

The e-mail has the look and feel of an urban legend. In this case, first impressions would prove accurate: the message’s claims are false, although they contain enough grains of truth to make its argument seductive. Dr. Leigh Price, an organic geochemist with the U.S. Geological Survey (USGS), did indeed produce a draft study about a decade ago that placed the high-end estimate of potential resources in the Bakken Formation at 503 billion barrels (the low end of his range was 271 billion barrels). Sadly, Dr. Price died in August 2000, and the EIA notes that his study “did not receive a complete scientific peer review by the USGS and was not published as a USGS product.”

The USGS released an updated assessment in 2008 estimating that the Bakken Formation has between 3 billion and 4.3 billion barrels of undiscovered, technically recoverable oil. Though this is 25 times greater than the USGS’s 1995 estimate for the Bakken Formation, it clearly will not “eliminate all American dependence on foreign oil.” As with ANWR, the conventional resources in the Bakken Formation are not insignificant, but do not represent a solution to the U.S.’s energy problems.

Oil Depletion

In addition to the fact that increased exploitation of conventional domestic resources will not solve the U.S.’s energy security situation, there are also inherent problems with continuing to rely on a finite resource like petroleum for all of our transportation needs. Bruce Dale, University Distinguished Professor of Chemical Engineering at Michigan State University, notes in From Energy Crisis to Energy Security (the volume that I co-edited with Cliff May): “We can argue about when a peak in oil production will occur, but it is obvious that such a peak must eventually come. We are burning oil much more rapidly than nature is producing it.”

Claims that the world was running out of oil have proven false in the past (for example, the predictions made in 1972 by the Club of Rome). Is there reason to believe that the present situation is different?

One important dimension of this question is that, regardless of whether worldwide oil supplies will soon peak, Saudi Arabia’s production is critical. Saudi Arabia holds 25% of the globe’s proven reserves, produces almost 10 million barrels of oil per day, and is the only country that can maintain excess production capacity of around 1.5 million barrels per day (a “swing reserve”) to keep world prices stable. As Matthew R. Simmons notes in his pathbreaking book Twilight in the Desert, “[f]or years, every important energy supply model has assumed that Saudi Arabian oil is so plentiful and can be produced so inexpensively that its supply is expandable to any realistic demand level the world might need, at least through the year 2030.”

While Saudi Arabia has met its supply expectations in the past, there has been little outside verification of its ability to continue to do so–particularly as worldwide demand grows. Based on a study of over 300 technical papers discussing Saudi Arabia’s petroleum resources, Simmons concludes that Saudi production “is at or very near its peak sustainable volume,” and “is likely to go into decline in the very foreseeable future.” He writes:

Though Simmons’s work has its critics, and he readily concedes that many aspects of Saudi oil production are shrouded in secrecy, he further highlights the danger of continued reliance on a finite, and depleting, resource.

Conclusion

While increased domestic drilling may well be a laudable policy, it is important not to lose sight of the bigger picture: rather than just increasing the supply of oil, we need to actively foster alternatives. There is no forced choice between domestic drilling, on the one hand, and policies like an open fuel standard (requiring automobile manufacturers to increase the percentage of their inventories that are “fuel-choice enabling”) and promoting electrification of the transportation sector, on the other. But the latter policies are far more critical to our energy security than the former.

Daveed Gartenstein-Ross is the vice president of research at the Foundation for Defense of Democracies, where he directs the Center for Terrorism Research. He is a Ph.D. candidate in world politics at the Catholic University of America, and the co-editor of From Energy Crisis to Energy Security: A Reader.