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Drilling for oil

Today, I read an article by Robert Samuelson in the Washington Post advising that the U.S. allow drilling for oil in previous no-go drilling zones because the cost of oil is rising. Originally, I agreed with his assessment. Today, I have grave doubts whether drilling in environmentally sensitive areas is a good idea.

What caught my eye in what Samuelson said however was the word ‘stupidity’:

It may surprise Americans to discover that the United States is the third-largest oil producer, behind Saudi Arabia and Russia. We could be producing more, but Congress has put large areas of potential supply off-limits. These include the Atlantic and Pacific coasts and parts of Alaska and the Gulf of Mexico. By government estimates, these areas may contain 25-30 billion barrels of oil (against about 30 billion of proven U.S. reserves today) and 80 trillion cubic feet or more of natural gas (compared with about 200 tcf of proven reserves).

What keeps these areas closed are exaggerated environmental fears, strong prejudice against oil companies and sheer stupidity. Americans favor both “energy independence” and cheap fuel. They deplore imports — who wants to pay foreigners? — but oppose more production in the United States. Got it? The result is a “no-pain energy agenda that sounds appealing but has no basis in reality,” writes Robert Bryce in “Gusher of Lies: The Dangerous Delusions of ‘Energy Independence.’”

-Robert Samuelson, Washington Post

Samuelson argues emotionally and passionately, but not logically in using the term ‘stupidity’ to describe those who disagree with his viewpoint. The fact of the matter is the United States consumes over 20 million barrels of oil daily, that’s over 7 billion barrels of oil a year. He states the areas to be drilled MAY contain 25-30 billion barrels of oil.

The areas Samuelson wants to drill also MAY NOT contain 25-30 billion barrels of oil, they may contain considerably less. In addition, 30 billion barrels is only 4 years consumption at present rates. Is it really worth the permanent environmental harm for four years of consumption? From where I sit that is trade off that is dubious and must be scrutinized quite carefully.

Ultimately, I am a fairly ardent supporter of so-called big oil. However, I recognize global warming, the environment, and oil independence as important issues now and in the future, for us and our descendants. Samuelson’s glib and condescending dismissal of the opposing view regarding drilling in environmentally sensitive areas does not do this debate justice. He only makes himself look petty and ultimately hurts his argument.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.