No Silver Bullets But Plenty of Oil

In at least a dozen speeches, press conferences and weekly addresses since the recent spike in gas prices President Obama bellowed the same scripted lines:

There is no such thing as a quick fix to high gas prices.  There is no silver bullet.  Anyone who tells you otherwise is riding the political wave of the moment.  We can’t just rely on drilling.  Not when we use more than 20 percent of the world’s oil, but still only have 2 percent of the world’s known oil reserves.

Yep, there’s no dial in the Oval Office a President can turn to immediately lower the price on that big sign at the corner gas station. But that doesn’t mean government is blameless for the price being higher than it could be, or that Obama’s policies haven’t accelerated the rate of price increase.  The President and Congress are not powerless.  They could roll back government barriers to greater supply so prices can decline over time.  But this President is focused on so-called green energy and doesn’t want to see an increase in the supply of petroleum.

Does America have 2% of the world’s oil reserves while somehow using up 20% of the world’s oil?  This assertion is meaningless and irrelevant.   It’s been knocking around for decades and should be called the phony oil reserve percentage, or PORP. The purpose of the PORP is not to reveal useful information, but to provoke confusion and anxiety among the people so we’ll more readily accept government interference in the production and allocation of energy.

Like most businesses oil exploration, drilling, production and marketing is more complex than it appears and can’t be summarized in a politician’s clever soundbite.  There are several measures of the amount of oil beneath the ground and the ocean floor.  Here are two:

  • Undiscovered Resources: Quantities of Oil and natural gas in so far unexplored areas but reliably estimated to exist based on geologic characteristics similar to areas where oil and gas have been discovered and produced.
  • Proved Reserves: Estimated Oil and natural gas in places where there is active drilling and production today.

The Proved Reserves estimate is always the smallest measure yet it is always used by those with a political agenda.  To illustrate the folly in passing laws and setting national policy based on “proved reserves” consider it’s history.  In 1980, the official, government estimate of proved reserves was roughly 30 billion barrels.  But from 1980 through 2010, America produced over 77 billion barrels of oil.  Today, the official estimate is that there are 20 billion barrels of proved reserves.  How can this be?  “Proved reserves” does not include all the oil that is known to exist.  Not even close.

Today, Proved Reserves estimate doesn’t include vast quantities of oil at the northern edge of Alaska or most of the oil off the East and West coasts or under millions of square miles of federal lands because the government has banned drilling in all those places.  In other words, to further his “green energy” political agenda President Obama justifies continuing government imposed barriers to production with a statistic that is distorted by those barriers to production

Because much of the world’s oil is owned and produced by corrupt governments that can’t be trusted to reveal accurate information nobody really knows what percentage of total daily world oil production is consumed in the US.  It could be 20% or it could be less.  It could be more.   But it doesn’t matter.

The relevant question is: How many year’s worth of recoverable oil supply is there in America at the current rate of consumption?  According to the Institute for Energy Research the number is 169 years worth including both recoverable oil and recoverable oil shale.

 

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