Great article by Robert Rapier of R-Squared

.. while Democrats may undervalue our need for domestic oil, Republicans can be wildly delusional about the prospects for domestic oil production to supply our needs. In each case, there are elements of truth. No doubt we can produce more oil, and without a doubt there remains oil to be discovered. As I have pointed out before, both oil and natural gas production have been on the rise for the past couple of years. In fact, natural gas has set production records. So if prices are high enough, there are marginal sources that will contribute more to U.S. energy supplies. But replacing the 8 million barrels per day that we currently import is wildly unrealistic, and would require the U.S. to greatly exceed the 1970 oil production peak of nearly 10 million barrels of oil per day. (Current U.S. oil production is under 6 million barrels per day).

U.S. Oil Production Peaked in 1970 at Nearly 10 Million Barrels per Day

Misleading Study Obfuscates Recoverable Reserves

But where do some Republicans get these notions? From reports like this one: U.S. Experiencing the Beginning of a Long-term Energy Boom:

On December 6th, the Institute for Energy Research released a groundbreaking report claiming that the amount of oil that is technically recoverable in the U.S. is more than 1.4 trillion barrels, with the largest deposits located offshore, in portions of Alaska, and in shale deposits throughout the country. The report estimates that when combined with resources from Canada and Mexico, total recoverable oil in North America exceeds nearly 1.7 trillion barrels.

To put this into perspective, the largest producer in the world, Saudi Arabia, has about 260 billion barrels of oil in proved reserves. It’s suggested that the technically recoverable oil in North America could fuel the U.S. with seven billion barrels per year for almost 250 years.

So, what does this mean for our energy future? For starters, it could mean the end of our reliance on imported oil from unfriendly nations.

I find these sorts of reports highly misleading, for the following reason. It is true that the U.S. has tremendous oil resources. But it is also true that most of those resources are not economically recoverable. An analogy I have used in the past is the amount of gold in the oceans. There are trillions of dollars of gold in the oceans that is technically recoverable. But that gold is not — and in my opinion will never be — economically recoverable. So it would be misleading for me to argue that we can have all the gold we want if we just get serious about it.

In fact, I tracked down the report referenced above from the Institute for Energy Research: North American Energy Inventory. Then I tracked one of the references they used to come up with their estimate of more than a trillion barrels of “technically recoverable” oil in the United States. The source is a U.S. Department of Energy report: “Undeveloped Domestic Oil Resources.” What that report says is quite different than the implications that are being drawn. The following chart tells the tale:

So of the 1.3 trillion barrels of oil from this DOE report, most is not technically recoverable, and the only category that is known to be presently economically recoverable is that tiny sliver of 22 billion barrels that says “Proved Reserves.” This accounts for less than 2% of the 1.1 trillion barrels categorized as “Undeveloped Oil In-Place.”

A common problem here is the confusion between resources and reserves. Back to the analogy of gold in the oceans, the resource is 25 billion ounces of gold in the oceans. That is the estimated inventory of gold in the oceans. The reserve — which means the amount of that resource that is technically AND economically recoverable — is zero ounces of gold. This is because it may require 10 or 100 times the value of the gold to extract and purify it from the oceans.

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