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Fix the Leak First and Then We'll Talk

Though the brown pelican seems to be the bird most affected by the BP oil spill, the albatross may be the most appropriate icon for the mess in the Gulf. For one is apparently hanging heavily around President Obama’s neck. Now he says he’s “furious about the whole situation” and is talking to experts to figure out “whose a** to kick.”

Of greater concern than the president’s fury, though, is the tendency, in a serious situation, to make ill-conceived snap-judgment policies. For instance, he asserts deep drilling means we are running out of oil and therefore we should abandon it as anything but a short-term energy source. In addition, according to Obama, any setback with conventional fuels justifies a radical and expensive restructuring of our energy supply with cap-and-trade.

Just as there will be time later to sort out blame, there’s no need to rush to make long-term energy policy just because a crisis might go to waste. Urgency demands attention to stopping the leak.

Instead we hear from the president that deepwater drilling is a sign that we are running out of petroleum, that we must move on to other energy sources. But his administration’s own experts paint a different picture.

According to the Department of Energy’s Annual Energy Outlook, 2010, annual U.S. petroleum production will rise by 18 percent between 2010 and 2035, with offshore production rising over 40 percent. More interesting is what happens to our reserves. The same source shows the reserves also rising, from 18 billion barrels to 24 billion barrels.

Those not familiar with oil industry definitions might find this confusing, but the geology and economics work this way: Finding and confirming reserves is costly. So, it doesn’t make sense to do expensive exploration and development decades ahead of extraction. Further, advances in technology allow access to oil that was unreachable, economically, in the past. So, as technology improves and when prices rise, oil that we knew about but didn’t count gets added, and oil we didn’t know about gets found.

That’s how we can start with 18 billion barrels now, extract over 50 billion barrels over the next 25 years and end up with 24 billion in the reserves. We won’t actually be making more petroleum, but we might as well be.

The president also claims that an energy bill full of colossal subsidies to windmills and solar cells will help free us from our dependency on oil. That’s the bait-and-switch routine used by the wind and solar industries. To the extent that they do anything useful, wind and solar power produce electricity. 

A common misperception is that we when we generate more electricity from wind and solar, we can produce less from oil and then use the oil saved to reduce our imports or offshore drilling. The problem with this argument is that over the past several decades we have virtually eliminated oil from electric-power generation.

Less than 1 percent of our electricity comes from oil. That 1 percent exists because it is very difficult for fuel switching in a few places. So, wind and solar can only substitute for coal, natural gas, and nuclear (how well they substitute is another story)—energy sources we have in great abundance domestically.

If you want to reduce the risk of oil spills, wind and solar do nothing.

But we do want to reduce the risk of oil spills. So we will need to stop the current spill, figure out what went wrong (both with the originating blowout, and with the response to plugging and containing the spill) and devise appropriate remedies as we move forward.

This is what we’ve always done as a nation when faced with setbacks. We don’t quit driving cars or riding bikes because fatal accidents occur. We do our best to make those activities safer.

We need a similar attitude in the Gulf. Yes, we need to be sure drilling technology does not move ahead of safety technology. 

And yes, we need to take a full measure of the costs of this spill. But a policy environment full of fury, vengeance, and political opportunism is a bad one for making long-term decisions.

David Kreutzer, Ph.D., is the Research Fellow in Energy Economics and Climate Change at The Heritage Foundation.

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