Argument: US offshore oil is significant, can have big market impact

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“Our view on energy dependence: Yes, drill offshore for oil, and do many other things, too.” USA Today. April 2, 2010: “Critics note that the potential supplies offshore are a tiny part of the world market, but even so the Interior Department’s estimates range from 39 billion to 62 billion barrels of oil. We use 7 billion barrels a year, so if the oil is really there, it could be five to nine years worth. True, robust production wouldn’t kick in for a decade or more. But that same argument helped block action 10 years ago. Domestic gas supplies, meanwhile, are massive and underutilized.”

Kenneth B. Medlock III. Fellow in Energy Studies. “1. Resource Potential and Market Impact.” Opposing Views.com: “According to an assessment by the U.S. Department of the Interior’s Minerals Management Service (MMS), the OCS in the Lower 48 currently under leasing moratorium holds a mean estimate of 19 billion barrels of technically recoverable oil. This has led some to claim that opening the OCS will not significantly improve the energy situation because 19 billion barrels would sustain only about 2 years of current U.S. consumption. But, a more appropriate way to consider the issue is that if the OCS could provide additional production of 1 million barrels per day (b/d) of oil, our Persian Gulf imports could be reduced by up to 40 percent. At 1 million b/d, 19 billion barrels would last about 50 years.

It is likely true that opening the OCS will not have an immediate impact on oil prices because of the time necessary to organize lease sales and to develop supply delivery infrastructure. However, once development progresses, the expected growth in supply would eventually influence market prices. Some opponents point out that the US Energy Information Administration indicated that the impact of opening the OCS would be negligible. However, modeling exercises that do not capture the influence of market expectations – a critical feature of price formation – are not suitable to understanding the full market impact of an increase in available supply options. Moreover, greater supply should dampen price volatility, all else equal, which is another desirable outcome. Opening the OCS, therefore, should be viewed as a relevant part of a larger strategy encompassing a portfolio of options aimed at easing prices over time.”