Democrats talk at the Denver convention about creating and keeping American jobs.
Ironically the building that housed the largest research and development division of Arco Oil Company in Texas was sold by British Petroleum to Perot Systems and now serves as its headquarters. Perot Systems was founded by Ross Perot who previously created EDS Electronic Data Systems and who most importantly has been credited with throwing the 1992 Presidential election to Bill Clinton by drawing off many independent voters who would have voted Republican for George Bush senior. Perot Systems derives a significant amount of its business from state and federal contracts. A building that used to house American engineers, geologists, scientists, logistics people and ordinary employees who worked for an American owned oil company that strived to fill the gas tank for the average American now houses a company that focuses on giving computer support on state and the federal government social service contracts. This is the Democratic Party version of a success story. Outsourced government work under Bill Clinton replaces a former American owned world admired jewell of the oil industry that had provided gas for the American gas tank and many good American jobs for many years. So if you need reasonably price gas for your car, contact Bill Clinton and Perot Systems and ask them to give you a gallon of gas. This is the Democratic version of a success story, outsourced government work replacing a real company that produces a real needed product for the average American household.
The second take home point from this comment is that nuclear power is a friend of the environment and does not emit green house gases.
The Truth About Tire Pressure
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We're in no position to judge which estimate is closer to the truth. We can say that government experts aren't convinced by ARI's arguments. The EIA's Martin says the size of the oil fields expected to be found are "in general smaller" than those currently producing in the Gulf of Mexico, for one thing. Another factor is that most of what would be opened are "deep-water" areas, which the EIA defines as being more than 200 meters (656 feet) below the surface. "The high cost of deep-water exploratory drilling and deep-water production platforms is an additional factor that could initially hold back production," Martin says. "A lot of these areas may not be economically attractive to produce at this time." Indeed, it's reported that the cost of renting a high-end deep-water drilling rig now runs between $500,000 and $550,000 a day. Other reports put the going rate at $600,000 a day.
As for ARI's prediction that leasing could start immediately in some places, Martin predicts that it would take two or three years just to put a leasing program into place. And while the government might be able to speed up the start of leasing, another two to three years is required for exploring and drilling after a lease is approved. ARI's projection, too, assumes about a three-year lead time to find any new oil after a lease has been granted. "This is going to require time and personnel," Martin says, "and the industry is really constrained right now in terms of available personnel. And all of the [drilling] rigs right now are currently operating." Indeed, the New York Times reported June 19 that a global shortage of deep-water drilling rigs is causing a "critical bottleneck" in drilling where oil is known to exist or exploring for new offshore fields.
Was Obama Right?
Tires can be inflated quickly, so it's clear that paying proper attention to tire pressure could save more fuel than expanded drilling for several years, until drilling begins to produce significant additional amounts of oil. But what then?
By the year 2025, if even the lower of the two offshore drilling estimates proved to be correct, it would exceed the estimated 1.2 billion gallons of fuel per year that could be saved through proper tire inflation alone. Since each 42-gallon barrel of oil produces 19.15 gallons of gasoline (using 2007 figures), the peak output of oil that EIA expects from expanded offshore drilling would work out to be more than 1.5 billion gallons of gasoline per year. That's significantly more than the 1.2 billion gallons that GAO estimates can be saved from proper tire inflation, and it doesn't even take into account the possibility that actual production could be closer to ARI's much higher expectations. If those projections turn out to be correct, the added offshore production would yield nearly 7 billion gallons per year of additional gasoline.
Yet even these figures don't tell us everything. Each barrel of oil also produces more than 9 gallons of diesel fuel, 3 gallons of jet fuel and additional amounts of home heating oil and heavy "residual" fuel oil, among other products. Just saving gasoline can't possibly compensate for everything that would come from each added barrel of oil, at least not directly.
We note here that Obama didn't say we could "save all the gasoline" expected from expanded offshore drilling; he said "we could save all the oil' (our emphasis). So it's not enough to estimate only how much gasoline would result, we must somehow figure how much gasoline must be saved to offset, indirectly, everything that comes from a barrel of oil. We make the simple assumption that saving a gallon of gasoline offsets a gallon of diesel, jet fuel or any other product that comes from the added oil, and go on from there. And that makes the numbers much bigger.
Oddly, each 42-gallon barrel of oil actually yields between 44 and 45 gallons of refined product, according to the Energy Information Administration. This is due to something called "processing gain," which happens when crude oil is made into products which, in total, have a lower specific gravity than the oil itself – like gasoline. So ending the ban on offshore drilling would result in 3.5 billion gallons of petroleum product per year under the government's estimate, and nearly 16 billion gallons if ARI's prediction turns out to be accurate. Both those figures are far beyond the 1.2 billion gallon savings to be expected from proper tire pressure.
The Ethanol Factor
And that 1.2 billion estimate refers to "fuel," not gasoline. Many motorists today are burning fuel that is blended with ethanol. As a national average, EIA says that what motorists put in their tanks now is between 4 percent and 5 percent ethanol. That means for every gallon of fuel saved by proper tire pressure, about 95 percent to 96 percent is gasoline. So the 1.2 billion gallons of "fuel" that the GAO says could be saved would work out to be as little as 1.14 billion gallons of gasoline at the current rate of ethanol use. And that rate is due to rise. A law passed in 2007 requires ever-increasing amounts of ethanol to be blended into auto fuel. The EPA's Renewable Fuel Standard program will require that 36 billion gallons per year of ethanol be blended in by 2022, quadruple the current 9 billion gallons.
But even without factoring in a correction for ethanol, it is clear that the GAO's estimate of savings from proper tire inflation is only a little better than one-third of the amount needed to offset the EIA's conservative estimate of increased offshore production, and less than a tenth of what would be needed to offset the increase in oil ARI says it expects.
The Truth About Tune-ups
Although the public discussion has centered mostly on tire pressure, Obama also included "regular tune-ups" in his equation. The total savings that could be expected here, we judge, are modest compared with what might be saved through proper tire inflation.
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