As the debate over opening up more avenues to domestic oil production continues, it’s worth noting that last month, the Department of Energy, at the request of Senator Ted Stevens, produced an economic forecast about opening up the Arctic National Wildlife Refuge to oil exploration. The overall benefit? Well, not much, really.
Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027 for the high oil resource case, relative to the reference case.
In other words, the absolute, best case scenario for ANWR’s oil production is that if we open it up today, then 19 years from now the price of a barrel of oil will be $1.44 less than it would have been. While the most likely case expects that 17 years from now, a barrel of oil will be about 75 cents cheaper. Note that these are prices for a barrel of crude–not a gallon of gasoline. So the economic effect looks to be pretty marginal.
Granted, this report is merely a projection and subject to all the caveats thereto, but it should certainly give people pause with regards to the “great economic benefits” to be gained from opening ANWR to exploration. In all perfect honestly, I don’t really care much one way or the other if ANWR is opened to exploration (as opposed to opening up more offshore drilling, which raises some more serious environmental considerations). But given that the feds inevitably foot part of the bill for this type of deal, I think that we should question whether this is a worthwhile expenditure of resources, or if those resources are better spent elsewhere.
h/t Matthew Yglesias
