Monday, August 18, 2008

The Drilling vs. Alternatives Contradiction

F. Scott Fitzgerald once said, "The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function." By that measure, the present debate over energy policy in the Congress looks truly impressive, incorporating a number of such "opposed ideas." A prime example is the arguments against expanded domestic oil and gas drilling, many of which look equally applicable to increasing our production of ethanol from grain. In particular, if expanded drilling can be dismissed as not worth the effort or associated trade-offs, based on a curiously-low DOE projection of future production from US oil resources currently off-limits to drilling, then the US grain ethanol program should be subject to the same criterion. However, in the absence of any single, all-encompassing solution to our energy problems, can we afford to reject any of these options, or worse yet, to pit them against each other as though they were somehow mutually exclusive? We need fewer such contradictions, if we are to make real progress in reducing our geostrategic and financial exposure to oil imports.

Start with the energy contribution of that off-limits oil. I find it extraordinary that the DOE's estimate of 200,000 barrels per day from this resource has been so widely accepted without question--mainly by those, the extent of whose expertise concerning oil generally begins and ends with the business end of a gasoline dispenser. But set aside for a moment the apparent disconnect with the government's own estimate of 18 billion barrels of oil resource in the off-limits portions of the US offshore, a quantity a dozen times larger than the DOE's forecasted cumulative yield from these resources over 20 years. Let's stipulate that paltry-sounding 200,000 bbl/day and convert it into BTUs. It works out to roughly 0.4 quadrillion BTUs/year (quads), or 0.4% of our annual energy consumption, coincidentally about the same quantity of energy we currently get from wind power, based on the natural gas it displaces. Now translate that energy content into its equivalent in ethanol, and you get a figure of 5.2 billion gallons per year, equal to the entire increase in ethanol output mandated between 2007 and 2010--a mandate that was just upheld by the EPA against an appeal from the Governor of Texas. But if it is not worth increasing domestic oil production by the equivalent of 5 billion gallons per year of ethanol, creating US employment and providing the federal government with significant royalty and tax revenues, while displacing $8 billion per year in energy imports at current prices, then what possible rationale can there be for mandating and subsidizing an increase in our ethanol output by a like amount and risking its uncertain impact on the price of grains and other foods?

But wait, you say, ethanol is renewable and good for the environment, while oil is a depleting resource and bad for the environment. The grain of truth in this argument is more than offset by the significant environmental costs associated with corn ethanol production, including high water consumption, fertilizer runoff that contributes to a growing Dead Zone in the Gulf Coast, and greenhouse gas emissions that may actually exceed those of oil, when the global impact on land use for agriculture is considered. Nor is the depletion argument very compelling. After all, it's not as though the opponents of drilling intend to save our untapped offshore oil for future generations, who they probably hope will be even more averse to drilling, and who may lack a domestic oil industry capable of undertaking such a project, in any case.

Long-time readers of this blog know that I am not exactly enamored with our current policy towards biofuels produced from foodstuffs, and particularly with the manner in which subsidies for them are handed out. Ethanol is no panacea, and it consumes vast quantities of natural gas, pushing up the latter's imports and price in the process, but at least it displaces much more oil than it consumes and makes a useful contribution to reducing our oil imports. The severity of this energy crisis requires that we pursue every such source we can, including new supplies of conventional and alternative energy, along with the savings from improved efficiency. If it is necessary to hold our noses to the extent of accepting that we need conventional ethanol in our energy mix, at least for now, and that we must have tens of thousands of wind turbines--which some consider a blot on the landscape--then the same logic ought to apply to exploiting the domestic oil resources to which we have restricted access for reasons that have been superseded by events. Loving renewables and hating domestic oil is a contradiction that only benefits OPEC and America's economic competitors.

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