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Tuesday, June 24, 2008

Bush/McCain Offshore Proposal Saves 8 Cents/Gallon 10-20 Years Out

I really can't figure out which thing to be more angry at.

Should I be more angry at John McCain for proposing to open up offshore drilling, which even he admits would have ZERO short term effect?


Should I be more angry at much of the mainstream news media for not doing the math and reporting the g.d. truth about the b.s. that McCain is peddling.

Well, here's the math, from Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C.:

According to the NYT, the Energy Information Agency estimates that the total amount of oil in the offshore zone in question is about 16 billion barrels. If we assume that it would take about ten years from the day of authorization to get to peak production and that most of the oil is pumped out over 30 years, this would translate into a bit over 1 million barrels of oil a day.

That would be equal to about 1 percent of world production in a decade. If we assume a long-run demand elasticity of 0.3, this would imply a drop in world prices of approximately 3 percent. In today's prices, we would be looking at a drop in the price of a barrel of oil from around $135 to $131. If this were passed on one to one in gas prices (this is long-run story), we might expect to see a drop in the price of a gallon of gas from around $4.00 to around $3.92 a gallon.

That's a savings of only 8 cents per gallon after full drilling production started up and refining capacity kicked in 10-20 years down the road!