Ed's Blog

Natural Resource Consumption and Drilling in the Arctic National Wildlife Refuge

Proponents of drilling in the Arctic National Wildlife Refuge (ANWR) argue that the cause of “eliminating dependency on foreign oil” is a far more important goal than environmental concerns and possible environmental impact to ANWR.
In order to have independence from foreign oil, there are two basic perspectives. First, there’s the perspective of decreasing our demand for foreign oil. This can be achieved through conservation, changes in lifestyle and through the use of alternative fuels. Second, there’s the perspective of increasing our supply of domestic oil. This can be achieved by finding additional reserves, such as drilling in ANWR.
Does pursuing the second strategy (increasing our supply of domestic oil) solve our problem (eliminating dependency on foreign oil)? Suppose we drill in ANWR and find a 100 year supply of oil. This apparently solves our problem. However, at the same time, let’s suppose that our consumption of oil is increasing at a small rate of 2% per year. How long will a 100 year supply of oil last? A 100 year supply of oil only lasts 56 years with a modest growth in consumption.
Now what happens if demand for oil increases even more? Suppose the demand for oil is growing at a rate of 5% per year. How long does the 100 year supply last? The 100 year supply lasts just 36 years. Is a 5% growth in oil consumption a possibility? Consider that China with a population of over 1 billion people is experiencing economic growth with an ever expanding demand for energy. Consider the current demand for US consumers to drive SUVs and the increasing economic expansion in the third-world; and if further proof is needed about the growth in demand for oil, just check out the rising price of gas at the pump.
All of this analysis means that simply pursing a supply side solution to the “dependence on foreign oil” problem will not work. Given the likelihood of economic expansion throughout the world, our solutions to this problem must include reductions in demand.
Proponents of drilling in ANWR must realize that newly discovered oil supplies are dramatically reduced by increasing demand. Since supply side solutions must be coupled with reduction in demand anyway, why risk irreversible damage to pristine habitat?


In the abstract:



Let p = initial resource consumption

g = growth rate,
c = current consumption

then,



At end of year 1
c = p(1+g)

posted by Unknown @ 1:13 PM