Drilling in ANWR

Should We Drill in the Arctic National Wildlife Refuge? An Economic Perspective

Abstract

This paper provides model-based estimates of the value of oil in Alaska's Arctic National Wildlife Refuge (ANWR). The best estimate of economically recoverable oil in the federal portion of ANWR is 7.06 billion barrels of oil, a quantity roughly equal to US consumption in 2005. The oil is worth $374 billion ($2005), but would cost $123 billion to extract and bring to market. The difference, $251 billion, would generate social benefits through industry rents of $90 billion as well as state and federal tax revenues of $37 billion and $124 billion, respectively. A contribution of the paper is the decomposition of the benefits between industry rents and tax revenue for a range of price and quantity scenarios. But drilling and development in ANWR would also bring about environmental costs. These costs would consist largely of lost nonuse values for the protected status of ANWR's natural environment. Rather than estimate these costs and conduct a benefit-cost analysis, we calculate the costs that would generate a breakeven result. We find that the average breakeven willingness to accept compensation to allow drilling in ANWR ranges from $582 to $1,782 per person, with a mean estimate of $1,141.

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My comments: Is not drilling worth $1,141 (per person)? NO! The treehuggers (tundra lovers) would not cough up that much money to preserve it, yet they will use the coercive power of the government to prevent drilling.

DRILL NOW.

Is Energy Dependence a Problem?

But one thing is sure: it’s a myth that being dependent on imported oil is bad. As a way to stump politicians who perpetuate this nonsense, perhaps we should ask them this question: If oil is so critical and will become even more valuable when world supplies allegedly dwindle in the future, shouldn’t we use other countries’ oil now and have the U.S. government require that our limited production be saved to use or sell as the shortages worsen and future prices go even higher? Diametrically opposed to the present time, with the prevalent fears of dependency on foreign oil, this “conservation theory” was all the rage in the late 1930s and 1940s when a slowdown in finding new oil deposits seemed to threaten chronic future shortages (similar to the dire predictions after World War I and in the early 1920s before big oil discoveries were made late in the 1920s).

Of course, this is not the right policy prescription either. We should instead treat oil as any other product and let the market provide ample supplies at the lowest cost to the consumer.

from
U.S. Dependence on Foreign Oil: Why We Shouldn’t Be Alarmed

If we were talking about bananas, everybody would see immediately the foolishness of seeking “banana independence.” Nobody would fall for half-baked arguments about our addiction to foreign bananas or our love affair with banana bread. It’s obviously uneconomic to grow millions of bananas in this country; it could be done, but doing it would entail much greater costs than buying them from producers in places better suited to their production (that is, places where they can be produced at lower opportunity cost).

The argument with regard to oil, or anything else, is identical...

Arguments that we must resort to U.S. imperialism in order to enjoy the imported oil or the security of having continued access to it are bogus. If policy makers really believe such nonsense, they are bigger idiots than we thought–and they ought to fire those thousands of economists on the government payroll on grounds of rank incompetence. U.S. imperialism may spring from various motives, but the popular notion of “war for oil” makes no economic sense...

David Ricardo explained these sorts of things clearly two hundred years ago. They are explained in every introductory economics course taught in college. It’s high time the pundits caught up with the essentials of their subject.

from
Must the Government Combat Americans’ Addiction to Foreign Bananas?