Untapped Oil

Why don’t the oil companies drill for more oil in the places where they already hold leases? According to oil-industry sources, of the millions of offshore acres for which the industry has thousands of leases, approximately 75% have not been drilled and are not producing oil. It is estimated that if all these existing areas were being drilled, U.S. oil production could be boosted by almost 5 million barrels a day--which would relieve our dependence on foreign oil. So why open up more areas to drilling? Why not drill in the places where the oil companies are allowed to?

The answer is, duh, money. The oil companies want to have the right to drill in millions of additional offshore acres, and in the Arctic National Wildlife Refuge (ANWR), but they have no intention of immediately drilling in those areas. They haven’t even started drilling in the areas where they are allowed to. Right now, with the high price of oil, they would rather just buy oil from other countries and resell it to the American public at a premium. After all, under the current system they are making colossal profits.

Few people realize how expensive it is to drill for offshore oil. It can cost from $500 million to $1 billion dollars to build an offshore rig. Before drilling can even begin, years of exploration is required. Building offshore rigs and platforms, drilling the wells, transporting the oil from oil platforms to shore, and building the roads, pipelines, pumping stations, refineries, and other things required takes many years and enormous amounts of money. At the present time, the oil companies don’t have the huge amount of equipment necessary to carry out a large amount of additional drilling. It would take them over ten years to begin drilling in new areas like the continental shelf or ANWR. They would rather pocket the massive profits they are now making than plow that money into offshore oil rigs.

The oil companies are also worried about the economics of the volatile oil market. What if they went ahead and spent billions to erect the platforms and drill in the new places, or even the places where they currently have leases, and then the price of oil plunged? It has already showed signs of going down.

So if they don’t want to drill now, why do they want the government to open-up the outer banks to more offshore drilling? Why do they want to open up the Arctic National Wildlife Refuge to violent depredation and despoilment?

I can understand why the Republicans in Congress are screaming loudly to open-up the new areas to drilling. They don’t give a hoot about the energy crisis, the environment, or price of gas. Faced with a slowing economy, an unpopular president, his miserable war, and ethics embarrassments (like the indictment of Ted Stevens, their leader in the fight to open-up ANWR), they are clinging to a political lifeline-- drilling for oil. They have gotten together and analyzed the mood of the public. They have probably held a big meeting and passed-out talking points for the coming election. They have officially made drilling for oil the central issue in their campaigns.

The public thinks that there is a problem with short supply of oil and that if we open-up new areas to drilling the price of gas will go down. You and I know it won’t, but the average Joe doesn’t know that.

The oil companies are pressuring Congress for the right to drill in the additional offshore and ANWR areas because they want to stockpile millions of acres of land for the future. It is a land grab. They want to take advantage of the current panic. Someday in the distant future, when they are finished with the equipment they are currently using, or the oil in their current leases begins to diminish, and they are able to get additional tax breaks from a friendly Administration, they will try drilling in the other areas where they have leases. If they can get Congress to agree, they will also drill in the additional offshore areas and in ANWR; but not now.

I also think that there is another motivation. The oil company executives have made billions in the recent markets, but they have visions of gold. They look at the fabulous modern palaces being built by wealthy Arab sheiks and emirs, and think how nice life would be if they held the rights to the largest remaining oil reserves in the world.