Would drilling more Alaskan oil cut prices?

John W. Schoen Senior Producer • Profile • E-mail

The week's vote in the House to approve drilling for oil in the Arctic National Wildlife Refuge has several readers — including Kelly in Georgia — wondering if there's enough extra oil up there to make a difference.

How much oil is in Alaska and is it worth it?
-- Kelly J., Statesboro, Ga.

Whenever you’re talking about estimates of how much oil is in the ground, the only honest answer is: God only knows.

Oil geologists have gotten pretty good at making estimates. Even then, these analyses are hedged by including the probability that the expected amount of oil will ultimately be extracted. And even with the latest 3-D seismic data analysis (4-D, if you track underground changes over time), estimating reserves still involves plenty of guesswork.

The total volume of recoverable crude oil in the so-called coastal plain of ANWR, the last major untapped field left in Alaska (that we know of), comes to about 10.4 billion barrels, according to the Energy Department's analysis, which is based on data from the U.S. Geologic Survey.

That estimate predicts a 95-percent certainty that only 5.7 billion barrels are recoverable and a 5 percent chance there might be as much as 16 billion barrels. (These estimates cover both the oil believed to be reachable by land, as well as an offshore area within the 3-mile limit. So far, no one is proposing offshore drilling.)

So let’s go with the 10.4-billion-barrel estimate. The Energy Dept. figures that, from the day final approval is granted, it would take seven to 12 years to begin producing oil. That means ANWR oil would come on stream in 2013 and peak at about 876,000 barrels per day in 2024.

How much impact will that have on oil prices? Here’s where people on both sides of the ANWR debate start to play a little mischief with the numbers.

The U.S. currently uses about 21 million barrels of oil a day, about 6 million of which is produced domestically. But that domestic production is declining as older fields dry up. So adding ANWR oil won’t bring an increase in U.S. oil production, it will barely make up for the lost production from declining fields. Nor will it make up for the increased demand of another 1.5 million barrels a day by 2013 — unless we figure out a way to conserve a lot more oil.

On the other hand, 10 billion barrels is a lot of crude. Drilling proponents say it amounts to something like 20 years worth of imports from Saudi Arabia. (While that sounds pretty good, it overlooks the fact that only about 10 percent of U.S. oil imports come from Saudi Arabia.)  If all 10 billion barrels were recovered, at 1 million barrels a day, production would last for 27 years. But that's not likely.

In any case, drilling in ANWR isn’t likely to make much of a dent on the cost of crude. With global demand of some 85 million barrels a day — and rising — even an extra 1 million barrels a day wouldn't be enough to have a significant long-term impact on prices. Assuming global demand continues to grow by 2 percent a year, a million barrels a day will represent about 1 percent of overall demand by 2013.

So is it worth it? For oil companies, it would almost certainly be profitable to produce some of the oil under ANWR. And although those companies have developed ways to reduce environmental impact, production would almost certainly have some long-term impact on local wildlife and fishing. That's why ANWR was off limits to drilling in the first place. Still, it’s reasonable to think that, in theory, some balance could be struck.

But there’s no way drilling for oil in ANWR is going to head off the oil crunch of the next decade.

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