NCPA - National Center for Policy Analysis

THE PRICE IS RIGHT

August 10, 2006

If the loss of Prudhoe Bay's declining production causes oil prices to rise, shouldn't the Arctic National Wildlife Refuge's (ANWR) greater untapped reserves lower prices at the pump?  That "six-month supply" suddenly looms very large, says Investor's Business Daily (IBD).

  • The loss of Prudhoe Bay's 400,000-barrel-a-day output -- 8 percent of U.S. production -- sent September crude futures up $2.22 to $76.98.
  • The Los Angeles Times speculated that pump prices might soon top $4 a gallon as California refiners struggle to replace the 20 percent of their supplies they got from Alaska's North Slope.

According to the Energy Information Administration (EIA):

  • Some 10.4 billion barrels of recoverable oil lie dormant just 60 miles east of Prudhoe Bay in ANWR.
  • ANWR's peak production could be anywhere from 900,000 to 1.6 million barrels of oil a day; that's the equivalent of discovering four new Prudhoe Bays.

Unfortunately, there are other potential disruptions in energy supply looming, says IBD:

  • Iran has threatened to withhold its daily exports of 2.5 million barrels of oil in any confrontation with the West.
  • Nigerian production has been reduced by almost 700,000 barrels a day by attacks from separatist rebels in the Niger delta.
  • China is on a global energy hunt seeking to increase its supply of oil for its growing military-industrial complex.                                                                     
  • Cuba recently granted China's state-owned oil company permission to explore for oil within 50 miles of Florida's coast on Cuba's side of the Florida Strait.

President Bush is considering releasing oil from the Strategic Petroleum Reserve to make up for the reduction in supply.  How about developing the strategic petroleum reserve in ANWR and in the outer continental shelf to increase supply?  And reduce prices, suggests IBD.

Source: Editorial, "The Price Is Right," Investor's Business Daily, August 10, 2006.

 

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