Friday, June 27, 2008

Offshore Oil or Offshore Wind, Part 2

John McCain is repeating the old conventional wisdom that we should set aside environmental concerns and open up more of our coastal waters to oil drilling. You know the conventional wisdom: Environmental benefits are nice, but expensive. Clean energy proponents are well-meaning, but naive and not very practical. Put another way, if we want real energy, we need to make a mess somewhere.
John McCain is either unaware of the extent to which the world is changing, or hopes the rest of us won't notice. But more and more people are noticing the world is changing, and that environmentally sound energy choices are increasingly more economically sound than simply burning more fossil fuels. This is a theme I have stressed repeatedly, as when
I first spoke publicly in favor of wind power in Delaware in March of last year:
The conventional wisdom is that the public’s environmental interest is in conflict with the public’s economic interest. But my review of the record leads me to conclude that the conventional wisdom has been turned on its head in this case; burning more fossil fuels doesn’t make economic or environmental sense for Delaware. Simply put, 19th century technology is not suited to meet the environmental and economic needs of the 21st century.
I have at times used the financial analysis tools I learned in business school to demonstrate the economic value of sound environmental policy. But sometimes the reality is so clear that it can be understood without complex models.
The debate over wind power in Delaware was won because most people understood that rising fossil fuel prices would make the offshore wind farm a good deal by comparison. The idea of a gas tax holiday didn't work for Senators McCain and Clinton because people could easily see that oil companies would just keep prices high and pocket the difference.
I think McCain's proposal to open up offshore drilling will not be the vote winner he hopes for the same reason. You don't need to be trained in present value analysis to understand that oil that would not flow for another ten years isn't much use to anyone now. And as more people see the possibility of offshore wind coming online in four or five years, the idea of what's naive and what's practical will shift even more dramatically.
When confronted with the uncomfortable fact that offshore oil would not come online for ten years, John McCain resorted to the argument it would provide a psychological benefit. The New York Times reports
Barack Obama's sharp retort:
Mr. Obama was responding to remarks that Mr. McCain made on Monday in Fresno, Calif., when he observed that even though the nation might take years to benefit from offshore drilling, "exploiting those reserves would have psychological impact that I think is beneficial."
Mr. Obama seized on those comments while speaking at a town hall-style meeting here.
"'Psychological impact'?" Mr. Obama said. "In case you’re wondering, that’s Washington-speak for 'It polls well.'"
He added, "It’s an example of how Washington politicians try to convince you that they did something to make your life better when they really didn’t."
It's the 21st century folks. Fossil fuels are running out. The gee whiz era of renewable energy production is over. The Bluewater Wind project is scheduled to come online in four years. When offshore wind turbines can be erected twice as fast as offshore oil rigs, it's a clear sign that the energy economy is changing, and for the better.
Keep in mind I am not suggesting that wind power can replace gasoline for our cars now. The Economist last week published
a good review of how the electric grid needs to change to make the fullest use of wind power.


Anonymous Anonymous said...

2:33 PM, June 27, 2008  
Anonymous Anonymous said...

It is my understanding that all existing off-shore drilling rigs are under contract for the next 5 years or so. So the only way for off-shore drilling to begin in a short time would be for those contracts to be bought out by local drillers. Working out the deals and moving the rigs to our shores would take at least a year. Drilling and beginning production at a new site would take another year or so. The immediate remedy would not take effect for years.

There are existing off-shore leases that are approved for drilling in the number of some 63 million acres. They are not being exploited because they are in "deep" water and considered more expensive, by the oil companies, to drill and to transport the oil to shore. They want closer to shore rights as a matter of production economics.

Any spills or leakage at the wells far off shore would have time to disapate before reaching the shore thus minimizing the effects at any particular shore location. Close in spills would more likely concentrate the effects in a narrower range with more and greater environmental damage.

4:47 AM, June 28, 2008  
Anonymous Anonymous said...

Tom -

While wind turbines can be erected much more quickly than getting an offshore oil production rig in place and up and running, it should be realized that in terms of energy produced, a wind farm is far more capital-intensive than oil production.

For example, a single large oil production rig producing say 10,000 barrels per day, can provide enough energy to equal the entire output of Bluewater's currently proposed 200 MW wind farm.

The only problem, of course, is that oil won't last forever and is getting more harder and expensive to find. So, things like wind are solar are the right way to go. But we've got to realize it is going to take an enormous capital investment, something that will become increasingly difficult if the economy continues the way it has been.

8:57 AM, June 28, 2008  
Anonymous Anonymous said...

The wind power electricity is going to be dead cheap in ten years.

If we shifted the subsidies that oil companies are getting to wind power companies it would be cheaper sooner because your "capital investment" problem would be solved.

In a way it is like driving vs. public transit. People only think that driving is cheap because they don't connect it with the huge up stream cost of hoghway building and the downstream costs of wrecking the environment.

10:19 AM, June 28, 2008  
Anonymous Anonymous said...

From the perspective of "fossil fuels", I believe that Pandora's box has now been opened.

We now have to make it work in order to demonstrate the economic benefits of living well environmentally....

It can be done, on the cheap.

And much of it perhaps will came from research compiled to assist this small battle that has just concluded.....

3:23 PM, June 28, 2008  

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