24 June 2008

Outer Continental Shelf Drilling Again

As a follow-up to Chabot's continued mantra of more drilling as the solution to our oil dependency, see this interesting post:

...amount of oil in the offshore zone in question is about 16 billion barrels. If we assume that it would take about ten years from the day of authorization to get to peak production and that most of the oil is pumped out over 30 years, this would translate into a bit over 1 million barrels of oil a day.

That would be equal to about 1 percent of world production in a decade. If we assume a long-run demand elasticity of 0.3, this would imply a drop in world prices of approximately 3 percent. In today's prices, we would be looking at a drop in the price of a barrel of oil from around $135 to $131. If this were passed on one to one in gas prices (this is long-run story), we might expect to see a drop in the price of a gallon of gas from around $4.00 to around $3.92 a gallon.

I guess it is similar calculus for ANWAR since Chabot claims it has 16B barrels also. Prices are not going down, unless demand is significantly reduced or the dollar gains a lot.

I'm going to try to quit posting about oil, because I think city living is good, even if oil is cheap and endless. To me, the cost of gas doesn't really figure in my personal decisions. However, maybe to some readers it does.

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