Cspan coverage of offshore drilling senate hearing

okay listened to cspan coverage of a republican senate committee hearing on offshore oil drilling...well...several comments in recollection to what I heard. No specific cost estimates provided as to the cost of gas as such relates to expansion in oil drilling, and best estimates concerning higher production would be at three to five years, perhaps, with regards to any further impact with regards to the cost of gas (again no cost estimates provided). Furthermore in the committee hearing the only response given as to how this would help people immediately was only on point of political deflection...well if we had been doing this a decade ago we wouldn't be facing such crisis...and who's ownership might that be exactly...democrats...heheh...now republicans were also helping to shape export/importation protocols as well as far as oil protocols were concerned...let's not say that democrats were stalling on this issue...secondly, the question was not directly addressed rather, this was offered in conjunction with a host of other alternative solutions. The estimates cited upwards of eighty billion barrels of oil alone (in the case of non-proven reserve estimates). Also in the committee hearing were regulatory challenges faced in the obstacle of off shore drilling...a number cited that would pose additional challenges with regards to investment thus proving additional challenges to offshore oil production. Amongst other concerns stateside rights with regards to feasibility in additional production. While it had been acknowledged that industry regulations were a consequence of domestic oil spills having occurred in the sixties, oil industry representatives had indicated a clean environmental track record since such time with respect to oil spills and the effect on environment. I would comment on such point, however, the lack of necessity in industry regulation does not mean that a clean track record for production may apply in the future. I believe additional challenges politically speaking with regards to stateside agreements in additional production may indeed be additional hurdles to be overcome. I would take contention with regards to the losses in the steel industry jobs if such production had been in place prior, noting that the steel industries may not have been displaced based upon necessity of steel based products domestically as a result of deficiencies of domestic steel demand, a senator had offered his opinion that steel jobs could have been saved if we had pursued further domestic production of oil, and I disagree with that contention. Rather displacement having occurred where demand for domestic steel was perhaps the same, while the production of steel products offered elsewhere in the world was offered to the extent that domestic steel production was no longer competitive. Now while the contention is that indeed this could be a solution in the future. I would comment amongst the set of alternatives available for energy increased domestic oil production may not be needed in the first place. It was also further commented in such session that investments per platform could cost upwards of $1 billion in the case of deep water drilling (with a hit or miss rate of 2 out 3 attempts). I think the opportunity to address immediate consumption concerns with demand and the cost of foreign oil, might be more readily addressed with more fuel efficient vehicles, and building a viable alternative fuel infrastructure, rather then attempting to significantly boost existing domestic oil production alone. I believe the viability of such offshore projects while perhaps, helping other markets abroad, may not be the sort needed on domestic basis. I see increased production as a means to perhaps facilitate current consumption demands with regards to energy inefficiencies (if the certain levels of oil production are needed to maintain viability in domestic oil production this implies that consumer market vehicles may be adjusted accordingly...in other words, I believe this may only provide greater incentive, for instance, of domestic auto manufacturers to maintain fuel consumption in terms of the mpg of the vehicle at the rates of consumption according to domestic fuel production...in other words, we may still have the same gas guzzling vehicles to boot in the future). To boost higher domestic production significantly I believe only helps to promote more of the same in terms of fuel consumption, and I believe the viability of these off shore projects is reliant upon certain consumption demands, unfortunately we were neither provided much cost analysis in terms of production (to the extent of what I recalled in the programming). I believe the opportunity is emerging where we can start shifting from significant increased domestic production, to viable fuel alternative infrastructure. If one is looking for immediate cost solutions in terms of oil, yes, fuel efficient cars will help in the short run, long term solutions minding that regulatory challenges, stateside agreement for offshore drilling challenges and cost challenges in the future I believe may prove formidable, let alone that estimates as of current concerning off shore oil are neither proven at this point, and finally I have not argued on the possible environmental outcomes given industry deregulation. I would argue on the point that deregulation means more faith that industry does what it says it intends to do with regards to operating cleanly with regards to its production infrastructure. Yes I have my bias with regards to industry regulations, and I believe especially so when such is there to protect and serve our environment, and neither solely reliant upon industry alone to maintain such.
skeptical concern...I just wanted to point this out neither as stall out...but merely that we have opportunities to debate such issue for a prospective upcoming election and with regards to viability not just solely in the case of increased domestic oil production but also other alternative fuel industries...sorry while I have heard increased debate from democrats concerning other fuel alternatives. My biggest concern is that if project viability is reliant upon predominance in an economy this could have impact with respect to alternatives. If domestic oil production can't compete alongside as a non-predominant or equivalent set to alternatives, then I am afraid we will be consuming in the future exactly as we have been doing all along, and I don't see republicans raising such questions. No this shouldn't be a case of either or...and that is the question that I am raising about off shore drilling viability in a more mixed energies future. Yes if consumption means the same in terms of how we consume gas it means we may continue to pollute our environment as we have for some time possibly to come as well. Unfortunately I did not see much cost analysis provided in such presentation, and I hope we are provided the most honest assessments with regards to the paths chosen in dealing with oil consumption.

Brief examination of some Domestic petroleum data

The topic that I had considered for this posting was in consideration of domestic petroleum data that I had collected from the site http://tonto.eia.doe.gov/country/country_time_series.cfm?fips=US. Mainly I wanted to compare Reserve estimate data with rate of change in reserve estimates as well as comparing such rate of change with respect to domestic production. The idea of this simply being how long might our oil reserves last under policy making to boost domestic production. Of course, one might ask, what sorts of effects might occur to our domestic oil reserves which are a finite resource, generally speaking, neither complimenting the rates of depletion with renewal. Graphically speaking, I compiled data into three depictions. One showing overall reserve estimates (fig a). Two, showing rates of change to domestic reserve estimates (fig b). This includes both production which would have depleting effects to oil reserve estimates, and discovery which accounts for petroleum discoveries or reappraisal to current domestic reserve estimates. Lastly I compiled data graphical to show that production rates appear to correlate with overall declines in rates of change in domestic reserve estimates (fig c.), or in other words there appears to be some possible connection between production declines and rate of change in reserve estimates. In other words, reserve estimates appeared to be while stabilized slightly declining and production declined nearly in parity with the slight declines of reserve estimate rates of change. What does this mean? It means we were overproducing domestic oil with respect to our reserve estimates and with respect to change in reserve estimates as associated with discovery. This is to say that a lake getting filled by a river was being drained too fast, kind of a bad analogy since oil reserves don't have rivers filling but if we consider the people involved in finding new oil as part of that process, we can see why domestic oil production went into decline (fig c) and for that declining transition domestic oil reserve estimates declined as well (fig a). The periods discussed in this post runs from 1980-2007.
As a bit of word of caution correlation between data and say, for instance, depletion in domestic reserves might not be completely substantiated as we can see also reduced production in the years 1980-2007, a correlative argument might be stronger if, for instance, one saw stable if not escalated domestic oil production with reserve estimate declines as well as discovery declines. Imported oil, I believe otherwise, might demonstrate infrastructure problems say in the boost of domestic production (that is, just like auto manufacturers needing to retool their facilities, boosting domestic oil production is not something that could be done overnight). I would say, also overall, despite declines in domestic oil production we have seen reductions in reserve estimates, and while discovery or net oil adds to reserve estimates appear to have steadied the decline in overall reserve estimates, the indicators right now might not look as promising with respect to boosting significant levels of domestic production based upon known reserve estimates. That is, we very well could see rapid depletion of oil reserves with discovery neither keeping in pace for consumption demands. To stabilize or get a better sense of graph data that I analyzed I did a simple linear regression to see generally speaking how data might be trending due to the volatility in gains from year to year in terms of what I term as discovery or addition to reserve estimates (figure b). ....we could otherwise, if having including previous data points a rather smooth continuous graph represented in the early 80s with some decline going forward. We can see stable production declines otherwise depicted relatively speaking (fig c). I would also note there appears to be, perhaps, parity between discovery of oil and yearly production of oil domestically speaking (fig c), with yet net loss of overall reserves estimates (fig a). Again it might be possible that with increased production that oil discovery also yields, but I would also comment that with overall net loss of reserve estimates in general, the trending does not look favorable in a long term outlook in terms of increased production and net reserve estimate gains.
Trend analysis scenario,...one assuming neither rate change with respect to oil exploration and discovery trends...and I say with regards to a fairly stable trending pattern...the scenario has the following assumptive factors, that rate change of oil discovery will remain fairly stable with marginal growth (again, I say based upon graphical data that rate of discovery while having volatility from year to year upon averaged examination appears to be relatively stable and neither significant trending to decline but neither incline). Production factors domestically will be assumed to be increased beyond say parity with respect to stable positive rate change of reserve estimate growth, we can guess at some estimates concerning current oil demands, and I can do some rough analysis with respect to growth in oil demands if consumption of oil in terms of energies demand relative to other energies remained the same (or in other words if people in this country, generally speaking are demanding oil relative to other energies proportionally the same percentage wise, what happens with regards to populace increase with respect to such demands). I would also comment, analysis in trending is mainly historic running from the periods of 1980 to 1993 we can see that relatively speaking trending of oil reserve estimates were on a downward slope, if such trending occurred based upon then levels of production and rates of oil discovery, we might be able to deduce a very rough estimate as to depletion in a near linear fashion. We can see depletion in reserve estimates at 6,060,000,000 barrels of oil, this is noting the levels of oil production on average were at 10,446,760 barrels per day or a yearly production rate at 3,813,067,400 barrels of oil. The rate of loss we would note at this level is over a period of 13 years with regards to oil reserve estimates this implies the rate of reserve loss of production and such production levels at 10,446,760 barrels per day would accrue at 466,153,846 barrels of oil per year, to determine the number of years for depletion at such rate loss, say, for instance at present reserve estimates we would simply divide total oil reserves by such rate of loss in this case, 21,757,000,000 / 466,153,846 which yields 47 years which is not bad...but lets say production levels were boosted to be included at present rates of consumption included imported oil, neither factoring growth rates in consumption demand. Noting that last years importation rate were at 20680.37 barrels per day we can see that a yearly importation was at 7,548,335,050 barrels of oil. If we produced say all of our oil domestically, now this is a purely theoretical point since knowing that we neither live in a trade vacuum, if the yearly rate is boosted above a known rate historically indicating decline in reserve estimates, how might the acceleration of reserve declines change. If we've determined a factor of rate of loss which historically applies as of present at 466,153,846 barrels per year and knowing for the periods 1980 through 1993 rate of production on average was 3,813,067,400 barrels per year, a net deficit would accrue at production levels beyond say 3813067400-466153846 barrels of oil which is 3,346,913,554 barrels of oil per year. This implies a net deficit at present levels of consumption would be 7548335050-3346913554 barrels of oil which is 4,201,421,496 barrels of oil per year, and this means it would take us 21,757,000,000/ 4,201,421,496 = 5 years to deplete our oil reserves...assuming neither high growth rates in consumption nor declines in such rates, assuming that we entirely consumed our known reported reserves one hundred percent with no importation of oil, assuming that our reserve capacities could be tapped at the rates necessary to sustain current consumption patterns, assuming a stable if somewhat declined oil exploration discoveries rate that would add to our reserve estimates (again assumed based on historical patterns ranging from 1980 to 1997). Now here's some fun stuff, based upon what we know now, what target production quota would we be looking at to maintain our oil reserves until depletion from now until say 16 years in the future (a nice math question based upon a commercial that I saw concerning an oil industry advertisement)...well, depletion rates are the unknown variable but we know that we have an estimated reserve at 21,757,000,000 barrels of oil and we know the target number of years we want our reserves to last which is 16 years, this would imply our rate of loss is at 21,757,000,000 barrels/16 years or the rate of loss is 1,359,812,500 barrels of oil per year. Looking at historical trending data we know that a rate of loss of oil occurs at 3,346,913,554 barrels of oil per year and that at the described rate of loss of 1,359,812,500 we would would actually be producing domestic oil at a rate of 4,706,726,054 barrels of oil per year and importing the remaining oil which at present levels this would be 7,548,335,050 barrels - 4,706,726,045 barrels = 2,841,609,005 barrels of oil per year
or in other words we would up our domestic production to levels meeting approximately 62.35 % of our consumption needs.
Any cost analysis ideas for such an investment...we'll consider this...very rough cost estimates for increasing our consumption at such levels gets I think very complex...but here are some ideas...any equipment that has to be permanently placed that can neither be disassembled or removed factors into cost analysis, or the rate of cost of oil extraction. The cost for removable equipment is factored by the cost to transport such equipment until it can be brought online again. Labor, maintenance, permanent equipment placed, equipment needing to be removed after having been placed (after the lifespan of such tap has been met). Unfortunately, due to complexity and time that I didn't want to engage on such subject I wouldn't be able to remotely provide cost analysis other then I could say that no single reserve source, if set at a deadline for full reserve depletion at 16 years, could extend beyond such time frame, and this sets, perhaps, a theoretical limit with regards to the possibilities of cost reduction, barring workers salaries are less, people find more efficient ways of maintaining their equipment, and/or reduce the cost of non-permanent elements to be used in the extraction and/or transportation of such oil. Recycling an established pipeline, could prove to have some costly challenges, for instance. Nevertheless, in a simplistic mathematical model based upon a commercial advertising energy independence for the next 16 years or something like that (which is not complete I would argue still requiring the importation of oil...for I believe based upon existing reported reserve data we would not be able to possibly increase production quotas above 62.35% or we would be tapping our reserves dry in less then 16 years), we might at least know that 16 years is going to have a factor with regards to the cost of our oil. Perhaps, I can do some mathematical conjecture with respect to target consumer pricing, a target cost companies might aim for so that for the next 16 years so that people aren't too angry and demanding better energy solutions. Let us say consumers are willing to pay something like $2.50 per gallon of gas....then we need to figure out...okay perhaps, a very bad rough estimate but here goes U.S. consumption of gasoline in the year 2006 was The US used about 510 billion liters (138 billion US gal/115 billion imp gal) of gasoline in 2006. If we presumed a relation to barrels of consumption listed in 2006 at 3,040,617,900 barrels of oil...keep in mind the barrels of oil are refined and we define gasoline typically neither in terms of barrels of gasoline, since nobody buys barrels of the stuff, well they do, but consumer's generally think of their gas in terms of the gallons needed to fill their car tank. If at the ratios of gasoline with respect to crude oil refinement were included in 2006 and consumer gas contained, say, the same blending ratios, and to my understanding the blending of gas is different in various parts of the country...anyways, so what I was saying is that the present ratios of gas refined directly from the crude needed in our consumption models was the same say in 2006 as for the next 16 years...that is, we are assuming that alternative additives such as bio fuels would not be included to change blending rates and/or displace consumer gas to crude oil ratios that were present in 2006. we can get an idea as to annual cost estimates that would be needed to meet a target quota of $2.50 per gallon of gas, or very very roughly speaking we might get an idea. So here goes...if all such crude oil consumed in 2006, then equivalence of one barrel of oil is 138,000,000,000 gallons/3,040,617,900 barrels of oil = 45.3855119 gallons of gas per barrel of crude oil. And what would the price per barrel of oil be if gas were at a target of $2.50 per gallon 45.38551193821492664 gallons /per barrel of oil * $2.50 per gallon = $113.4637798455373 dollars/barrel...you might notice...that roughly speaking we might be a little in the ball park of cost of barrels to the relationship of gas prices in terms of our real world markets...maybe anyways...proceeding further...so assuming constant consumption rates in the future, we need to determine what? the cost relationship or the threshold of costs that are company need maintain, in the absence of government subsidy to be profitable knowing the finite life of our oil reserves and this relating to the rates of consumption of gas. We know the the total number of barrels of oil we wish to produce which is 21,757,000,000 barrels, and the years spent tapping such reserve. The total of $2,468,631,458,099.36 in revenues / 16 years = $ 154,289,466,131.21/year...this is the target that I cannot exceed in order to maintain profitability and keep the oil cost reigned in so that I am not going above $2.50 per gallon of gas at current blend rates assuming blend rates do not change in the future. How this cost breaks down in terms of the equipment used to extract such oil is, of course, determined by the companies or corporations utilization of resources and equipment? We know that in a free market economy that gas prices are not fixed that would be illegal...rather I was using a fixed price to say that cost relationship in a dynamic market changes with respect to sale and production of such gasoline and crude oil, in terms of the potential market that one can sell in and/or the awareness a corporation or company would have with regards to crude oil and sales, profitability, and keeping costs in line. If that same gallon of gas costs more, the margins of cost that I have to stay within to remain profitable stretch relative to previous limits, so if the costs go up I may have more operating cost flexibility. The idea of this is to say yes at what limit would I no longer be profitable if my competitor or competitors sold oil such that I was neither able to operate at profitability. Generally speaking, well, I would hope as an oil industry producer to ethically provide such product in a fair and profitable way, striving to do so with the best efficiency in mind, regardless of competition. Usually companies and/or corporations are interdependent on the resources they need to assemble the equipment they need to do the work they need to produce the product they need. In other words, Big oil would have dependency on other industries such as steel for the resources necessary to produce the rigging and equipment needed to extract the oil...not including labor and manpower that would also be considered in such cost overhead, they would be dependent upon the research and development innovations, and/or petroleum geologists and scientists that would help, to ensure that their rates of oil find and discovery keep at pace neither to accelerate depletions in existing and known reserve estimates. Companies or corporations producing such resource, may not ultimately have much of a choice regarding the price of the product they sell, being mindful, that the price of the product they sell, is associated with other industries, associated with a dynamic labor market, and dictated by the nature of the investment and lifespan going into the reserve they intend to invest. As I explained previously, not all equipment lasts forever, thus, the lifespan of the reserve and the equipment also factor into the operating costs, and the potential sale and profitability of such product, and then also we can't neglect security of equipment...and that also effects the pricing of gas and oil.
Lastly, not related to cost relationships, I can't say ultimately what production costs and subsequently gas prices would like in the future if our domestic economy was shifted in such a way that we were push our domestic industries further to drill. I am for alternative industries and I have that bias concerning the the product offers our U.S. consumers with respect to their energy needs. More energies choices, I believe are a positive trend in markets. While oil is not solely monopolized in our markets, I would hope our consumer markets would continue to diversify as I believe this helps consumers with regards to an array of choices and neither a sole interdependence say on one product choice. Just as modern investments such as mutual funds have allowed investors to seek diversified investment strategies that may help in the risk management and loss, I argue or our energies sectors should be likewise diversified equally. The nice thing with renewable is that they help and benefit our environment :)...
personally, if I were in the oil business, in some way, it might seem theoretically nice to extract resources as soon as possible in some ways (because of overhead maintenance, that is assuming higher volume outflows aren't as costly with respect to maintenance over long periods of time...but then, if you have permanent and semi-permanent equipment established at source costing much money with regards to establishment and/or relocation, this means the cost overhead might go up relative to reserve lifespan, or in other words, if I plan to setup shop and jet in the next five years, I might be spending a lot more money in the short term versus using the least of such permanent and semi-permanent equipment that I need only maintain (with perhaps some lifespan). Higher costs means that the price that I am going to sell may end up costing more to a respective consumer.
Finally a last point supporting, perhaps, my theoretical contention above, if we look at the data of net change in reserve estimate data and compare this to the declines in yearly production data, we can see that production changes nearly match a corresponding linear regression curve with respect to changes in reserve estimation. This implies that our industries may have been well aware of needed changes to slow the rate of loss with respect to our domestic reserves and that industry changes were occurring to bring production in line with net growth in reserve estimates. What does this represent with regards to the theoretical forecasts for such industries, well, anyone arguing that production growth would not translate into domestic oil reserve loss, I would urge should consider the past historical data ranging from 1980 to 2007, at least with respect to history, data is not exactly promising in demonstrating production increase would neither incur corresponding reserve loss. Drilling for oil in the future with boosted domestic production at least in terms of historical data provided by U.S. government sources may not have a promising outlook in terms of our Domestic Reserve lifespans if the trends that I mentioned earlier apply.



I have compiled data from the following source

Data source http://tonto.eia.doe.gov/country/country_time_series.cfm?fips=US

for this blog posting.