Selling Snake Oil

As gas prices have soared, Americans have cast about for someone to blame. Oil executives, politicians and environmentalists are among those taking the heat. Surely, the run-up in prices must be the result of some nefarious actor intent on delivering misery to the masses. It cannot be the result of the inelastic law of supply-and-demand in action.

Fear not fellow citizens, U.S. Rep. David Davis, R-Tenn., has a plan to reduce gas prices by “at least $1.80” per gallon. No word on whether he also will be leaping tall buildings in a single bound.

Davis, perfecting the art of the pander, issued a news release Tuesday pledging to lower gas prices to about $2-per-gallon. The release mentions the upcoming July 4 holiday and family vacations, but is vague on exactly when this promised reduction might be realized.

Davis ties his petroleum price promise to passage of seven bills. These bills would open up the Arctic National Wildlife Refuge in Alaska for oil exploration and production and allow drilling in U.S. coastal waters along the Outer Continental Shelf. They would allow refinery construction on shuttered military bases; end a ban on federal purchase of liquid fuels derived from oil shale, tar sands and coal; and amend the Clean Air Act to reduce requirements for special fuel blends in polluted areas of the country.

Davis calculates that onshore drilling in ANWR would reduce the price of gasoline by seventy cents to $1.60 (presumably per gallon, although his press release doesn’t make this clear), drilling along the coast would save 90 cents to $2.50, building new refineries would save 15 cents to 45 cents and halting shipments to the Strategic Petroleum Reserve would save up to 5 cents.

According to Davis' office, these estimates are based on data from a variety of federal sources, including the Department of Energy. The congressman apparently multipled the number of recoverable barrels of oil from a source (like ANWR) by 5 cents to arrive at his savings estimates. But other DOE reports indicate long-term proposals, including ANWR, will have little effect on pump prices.

It seems quite unlikely that ANWR or the Outer Continental Shelf will be the magic bullet to bring back cheap-energy days.

According to the Department of Energy:

* Americans use 20.7 million barrels of oil per day. U.S. demand is beginning to decline because of high prices, but world demand, led by India and China, is surging.

* Drilling in ANWR could produce from 510,000 to 1.4 million barrels of oil a day by 2028. But the government’s own analysis indicates the real benefit will come in a reduction in oil imports – provided that demand for oil doesn’t increase. Any reduction in price at the pumps is expected to be negligible.

* The Outer Continental Shelf has an estimated known oil reserve of 8.5 billion barrels. Another 86 billion barrels might exist, but for now remain undiscovered.

Again, the Department of Energy doesn’t expect deep water exploration and oil production to reduce the price at the pump. Deep water work costs more than conventional oil recovery. The oil companies won’t eat this cost out of altruism.

There is merit to opening a discussion on ANWR and offshore drilling, so long as environmental concerns, including those of coastal states, are respected. These resources might be a bridge to newer technologies, but they are not an end in themselves, as some on the right side of the political spectrum would have us believe.

Two other Davis agenda items cause more concern. Reducing the number of fuel blends is fine, so long as the nation moves to the lowest emission blends – sometimes called California blends – rather than moving in the opposite direction. We cannot retreat on efforts to reduce smog and particulate pollution.

Likewise, any effort to convert oil shale to liquid fuel must proceed with caution. Oil shale is mined in open pits or strip mines; it isn’t pumped from the ground. We cannot render the Dakotas a wasteland in order to slake our unfettered thirst for petroleum products. Conservation should be a first step, not the last one.

Davis gives no indication that he has given due consideration to the environmental issues raised by some of his proposals. It isn’t even clear if he’s done the math. If he had, he would realize that drilling in ANWR and the coastal waters is no magic bullet to slay the high-price dragon.

Experts believe the era of cheap energy is over. A responsible congressman would work to help his constituents adapt to a higher-cost energy environment – the new reality of the 21st century.