How do I Stop Offshore Drilling? How, Indeed...

The question recently popped up among available titles for eHow writers at DemandStudio (an assemblage of the most tight-assed control freaks I've ever encountered in my life, but that's a different story): "How Do I Stop Offshore Oil Drilling?"

And it got me thinking: how does the average Joe or Jane stop offshore drilling, presuming of course that's what he or she wants? It's not as if marching around with picket signs in front of that BP office complex on West Memorial in Houston will have any effect - besides, I drive past it twice a day, and I have yet to see an enraged picketer. Is there a way to stop? It's a tough nut to crack, but the way I see it, there are three ways to stop offshore oil drilling and none of them is likely to happen...

First option: Someone - the Federal government or the states - has to prohibit or severely restrict offshore drilling. California has done this for years, spurred into action by a Unocal blowout off Santa Barbara in 1969. The Federal government has likewise prohibited drilling in the easternmost Gulf of Mexico and in Atlantic Coastal waters for more than twenty years, a policy the Obama administration announced would be relaxed only days before the BP Macondo blowout (see image) on April 20, 2010. The rescission of that policy is, as one might expect, now on hold.

Photo from the Christian Science Monitor

Given the "energy independence" talking point loudly bandied about by certain segments of the political spectrum (who seem perfectly content to repeat the lie that the US gets most of its oil from "unfriendly" nations¹), it is highly unlikely that the Federal government has the political will to ban offshore drilling. Some "blue states" in the northeast and northwest may enact new bans on drilling in state waters, but it's highly unlikely that a "red state" would even consider doing so. So the answer to "How do I [emphasis on the "I"] Stop Offshore Drilling?" could well be, "Elect a government that will ban it."

Second option: Enact legislation that makes offshore drilling so expensive that it's no longer a profitable enterprise. Increase the cost of drilling permits or require an indemnity bond so massive that no corporate entity can afford it. Realize, of course, that it already costs several hundred million dollars to drill one of these wells...

The political will question arises again for this option, so see the "Elect a government..." answer again. Unless there are two or three more Macondo blowouts in the next decade, rest assured that this will not happen.

Third option: Make drilling for oil unprofitable by reducing the demand. This is easier said than done, for several reasons. One reason is that, although the US still consumes approximately 25% of the world's oil production, the demand in expanding economies, such as China, is on the rise. Already China has surpassed Japan as the world's second largest economy (after the US) and it shows no signs of slowing. Reducing US consumption may no longer have the desired effect of reducing world output.

Currently, the US imports roughly two-thirds of the 20 million barrels of petroleum and finished petroleum products its citizenry consumes every day (in the neighborhood of 12-13 million barrels). In the US, petroleum products are mainly used for transportation. About two-thirds of all domestically-produced and imported crude oil is refined into gasoline, diesel, and jet fuel. The US transportation sector uses approximately forty-five per cent of its total petroleum consumption in the form of gasoline². What does this mean for so-called "energy independence" that offshore drilling will theoretically create? Well, one thing it means is that switching from incandescent bulbs to compact fluorescents does zip for reducing imported oil, because trifling few US power plants run on oil. Much of that imported oil (or oil produced by offshore drilling) goes straight into the fuel tanks of cars, trucks, trains, buses, and airliners.

It's a long way around to this, I know, but if you want to stop offshore drilling without government intervention (which ain't gonna happen as long as there are lobbyists and corporations can buy all the free speech they can afford), then you have to work to reduce the market value of oil. If you want to reduce the market value of oil, you have to reduce demand. If you want to reduce demand, you have to stop using so damned much of it - all those "yous" out there.


¹ per the US Department of Energy records, the two countries from whom the US imports the most oil are Canada and Mexico, neither of which is on any list of "unfriendly" nations.
² per the US Department of Energy again

Boycott BP! Boycott BP! Boycott BP! (and hurt small businesses instead)

The execs at Goldman-Sachs must be the only people in America hoping that oil will keep pouring from the BP Macondo well off Louisiana indefinitely. After all, up until April 2010, the billionaires on Wall Street were the most detested people in the country for the lavish bonuses they gave themselves just a year after contributing heavily to the destruction of the US economy, not to mention unemployment approaching 10%.

All that’s changed now: the most hated company in the USA is now BP. Big Oil (or as they call it in Texas, “the awl bidness”) has never been a public favorite. Maybe it’s because few (if any) other industries post the price of their products on every street corner; a product that most people buy as regularly as any heroin addict buys that nickel bag. Maybe it’s that so many people are just a little ashamed of their gasoline addiction… Or maybe it’s just that so many people don’t really understand the oil business.

That last is probably why almost every time an oil company incurs public ire, somebody decides it’s time to boycott their brand of gasoline. The cries of “Boycott!” rang out in 1989 after the Exxon Valdez ran aground in Prince WIlliam Sound, Alaska. When gasoline prices topped $4.00 per gallon in 2008, the same folks suggested that we all “boycott big oil." Presumably everyone would buy gas from “little oil” – whoever that is - instead.

The Care and Feeding of Blowout Preventers

Since the end of April, 2010, news stories have been filled with unfamiliar words and phrases about drilling for oil in deep water. We've heard about risers, drilling mud, semi-submersible drill ships, and blowout preventers. One phrase that was already familiar is “oil spill,” but how the mess that is the giant ecological disaster in the Gulf of Mexico happen? There was a blowout, and the blowout preventer didn’t work.

What is a blowout preventer? It’s a machine that exploration companies hope will never be used, a machine with only one task: to stop oil and gas from gushing unchecked from a well. To understand the job of the preventer requires that you know what a blowout is. We’ll start there:

Oil reservoirs are under huge pressure, mostly because they are deeply buried. For every foot a well penetrates into the earth, the pressure increases by about 0.43 pounds per square inch (psi). At the bottom of a 10,000-foot well, the expected pressure is more than two tons per square inch. Compare that to the pressure in the tires on a car, which are usually inflated to about 35 psi – and a 10,000-foot well is just an average depth.

To combat that immense pressure, a well that is being drilled is filled with a dense liquid called drilling mud. The weight of the column of mud that fills the well is kept high enough to offset the pressure on any fluids discovered by the well, and keep them in the ground until they can be safely extracted.

Some zones deep underground are under higher pressure than their depth would predict, a condition petroleum geologists call “overpressured.” When a well penetrates one of these zones unexpectedly, the pressure underground forces the drilling mud back up the well, often emptying the well in just seconds: a blowout. Blowouts can be so powerful that they also force the drillstring – thousands of feet of steel pipe – out of the well with the mud. Needless to say, a blowout is not just dangerous; it can be disastrous.

Blowout preventers (BOPs) are a component of the pipe that makes up a wellbore. They sit below the drilling rig on the ground surface or the seafloor. They are bolted to the top of the pipe, or casing, which forms the wall of the well at depth. Another length of pipe, the riser, is bolted to the top of the BOP and extends to the drilling rig above it, a distance of a few to several thousand feet. The casing contains the drillstring, which is considerably smaller. Drilling mud fills the space between the casing and the drillstring, or the annulus.

BOPs are designed to close the wellbore in case of a blowout, and to keep the fluids deep underground where they belong. There are two kinds of BOPs, which are usually stacked together: the first is a thick rubber donut that is supposed to clamp down on the drill string and seal off the annulus. The annular BOP sits on top of the blowout stack.

If the annular BOP fails to seal the well, the second type of blowout preventer is used. This design has hydraulic rams that drive hardened steel plates into the wellbore. The steel plates are designed to act like giant shears, cutting through the drillstring and creating a seal inside the BOP itself. When a blowout is detected on the rig floor – the mud begins to boil out of the casing or the gas detectors sound an alarm – rig personnel are trained to hit one of the many panic buttons all around the drill rig. That is supposed to activate first the annular blowout preventer and, if that fails, the hydraulic rams. At the BP Macondo well, the blowout preventer is presumed to have failed.

Some facts about blowout preventers, regardless of what newspaper stories have claimed:

• They’re not necessarily the size of a small house: a blowout preventer’s size is a function of the depth of the well and the diameter of the pipe. Some stacks are only four or five feet tall.
• Not all blowout preventers sit “on the sea bottom”: wells drilled on land can also hit overpressured zones that mandate use of BOPs.
• Not all drilling wells have blowout preventers; in fact, most don’t. Overpressured zones that can cause major blowouts occur only in a limited and fairly predictable set of areas and subsurface environments.

Major manufacturers of BOPS include Hydril and Cameron (maker of the BOP that failed at the BP spill).

The Anatomy of a Blowout

To comprehend a catastrophic oil well blowout, we first need basic understanding of how petroleum collects in underground reservoirs and how exploration for those reservoirs works. For starters; oil, natural gas, and water collect in underground layers when their path to shallower layers is blocked by an impenetrable zone. Instead of collecting in “lakes” or “rivers” of oil, however, hydrocarbons accumulate in tiny pores within huge volumes of rock.

Being buried under miles of solid rock means that hydrocarbon reservoirs are under enormous pressure. The pressure increases, on average, by a factor of 0.433 psi/foot or 9.792 kPa/meter. This regular pressure gradient means that pressure at the bottom of a ten-thousand-foot well is more than 4300 pounds per square inch; compared to a pressure of about 30-35 psi for a car tire. Since liquids cannot be compressed, deeply-buried reservoir fluids seek any possible pressure relief.

Drilling a hole ten or fifteen inches in diameter from the surface to a deep reservoir provides just such relief. To keep oil and water from spurting out of a wellbore, drillers fill the hole with fluid of their own. Called “mud” or “drilling mud,” this fluid is carefully designed to carry out several different functions, one of which is to match the pressure in the underground layers and prevent the crude oil from rushing to the surface. Maintaining balance is relatively simple in areas of normal pressure, where pressure at depth can be predicted from the standard pressure gradient (above).

There are, however, subsurface layers in which the pressure is much higher than that predicted by the pressure gradient. Unexpected penetration of such an overpressured zone can result in a blowout, as can improper drilling practices or poor well design.

When a blowout occurs liquids in the reservoir stream into the wellbore, forcing tons of drilling mud and thousands of feet of steel pipe from the mouth of the well at the surface. The rising column of oil, water, and natural gas are under such vast pressure that they can reach supersonic speeds; more than 1100 feet per second. Crude oil and natural gas are both flammable, and are often ignited by the heat of friction in the moving column or by sparks as metal and chunks of rock smash against one another. In the early days of exploration, drill rigs often “burned to the ground” after a blowout; though such gushers were looked on favorably before scientists understood the environmental havoc wreaked by such a disaster.

A blowout is both an environmental and an economic disaster, for not only are large quantities of a valuable resource wasted, the infrastructure at the surface is destroyed. In the April, 2010, blowout in the Gulf of Mexico, the semi-submersible drillship Deepwater Horizon burned and sank at a cost of $600 million and eleven lives. Five thousand barrels of oil per day, valued at some $400,000, poured out of the breached drill pipe. Because of such costs, exploration companies take expensive measures to prevent blowouts.

The first line of defense against blowouts is the drilling mud, described above. Before drilling into potential overpressured zones, mud engineers “mud up” to increase the density of the fluid in the well. The second line of defense is casing, heavy-weight large-diameter pipe that is cemented in place to line the hole and isolate zones of different pressure. The final line of defense is a massive mechanical device called a blowout preventer or BOP.

Blowout preventers come in several designs depending on the manufacturer (leading makers include FMC, Hydrill, and Cameron). A BOP is placed at the ground surface or, for offshore work, at the seafloor; between the drill rig and the well head. BOPs are designed to trigger automatically upon detection of rapid uphole flow, or trigger remotely on command. Blowout preventers come in two types: the first is basically a giant rubber doughnut that can be activated to seal off the annulus – the space between the drill pipe and the casing. The second type consists of massive hydraulic rams that force hardened, edged surfaces inward to cut the drill string and seal the well with a thick metal wedge.

The worst-case scenario of a blowout is one in which reservoir fluids breach the cement holding the casing in place and reach the surface around the outside of the pipe – in this instance, even BOPs are of no use. There has been speculation that this is what happened at British Petroleum’s Macondo well off the Mississippi Delta (April, 2010).

If the BOPs fail and a blowout occurs, options for recovery of the well are few. One option is to collapse the wellhead with shaped charges (compare to John Wayne’s portrayal of Red Adair in the movie “Hellfighters”). A more likely scenario is to drill a relief well that intersects the blown well – a technological challenge, to be certain, but doable. The relief well is used to dump high density “kill fluids” – super-weight drilling mud – into the wellbore of the flowing well and, eventually, bring it under control. Drilling a relief well takes weeks or months, while the blowout continues to spew crude oil, and can cost tens of millions of dollars.

In spite of all the technology and wellfield expertise, blowouts still occur. The April 2010 is one of the largest ever, a list that includes the Pemex IXTOC I blowout, which poured 10,000 barrels of oil per day into the Gulf of Mexico in 1979-80; and the 1969 blowout of a Unocal well in the Santa Barbara Channel off southern California. The environmental damage caused by the Unocal blowout is responsible for California’s strict regulation of offshore drilling.


Glossary: http://www.glossary.oilfield.slb.com/search.cfm
more information: http://www.chron.com/disp/story.mpl/business/deepwaterhorizon/6973912.html

Shale Gas Exploration and Groundwater Contamination: Hype, Extremism, or ?

In the United States, most experts believe that the fuel of the twenty-first century will be natural gas. U. S. oil production has dropped steadily for decades, and clean coal is less reality than a promise. Huge natural gas reserves have been identified, however, leading to increased visibility of a clean-burning, easily-transported fuel. Many of the new gas reserves are, however, termed “unconventional.” This means that companies must use new technology, apply old technology in new ways, or both to locate and produce the gas.

Oil and gas companies have produced natural gas for decades. In conventional reservoirs, gas is trapped deep underground in rock layers that are both porous and permeable. Porous means there are spaces within the rock to store natural gas or oil. Permeable means those spaces are connected so that oil and gas can flow. Another layer, a seal, acts like a bottle's stopper to keep gas and oil trapped in place. Many seals are shale, a rock that isn’t very permeable. In conventional reservoirs, companies drill through seals to the more permeable layers beneath them and produce oil or gas.

Geologists have long known that shale often has lots of pores filled with gas, but ignored them because their low permeability kept that gas from flowing into wells. In the 1990s, companies began using the technique of horizontal drilling. A well drilled horizontally starts as a vertical well, but begins curving high above the reservoir and keeps bending until it ends up going sideways. The horizontal portion of a well often reaches thousands of feet from where it enters the reservoir. It wasn’t long until someone realized that drilling sideways in a gas-rich shale layer would allow more gas to enter the well than poking a vertical hole straight from top to bottom. Horizontal drilling is the “new technology” part.

Even a horizontal well thousands of feet long can’t produce much gas unless shale's permeability can be increased by stimulation. To do this, companies use an existing technology called hydraulic fracturing, or fracking for short. Hydraulic fracturing is fairly simple: huge volumes of water and dissolved chemicals are pumped into the well under high pressure. Water can’t shrink, so the pressure cracks, or fractures, the rock around the well. Fracking also injects sand grains to prop the cracks open even when pressure is released. A frack job increases the permeability in a reservoir, allowing a well to empty pore spaces over a large area. This is a "new application of old technology."

Experts predict that three-quarters of gas wells drilled in the next decade will use horizontal drilling fracturing. Many frack jobs inject several million gallons of fluids. Once the well begins to produce gas, these fluids flow to the surface and must then be disposed of – often by re-injecting into a different subsurface layer.

Widespread use of this combination of technologies is allowing development of shale gas reservoirs across the U. S. Well-known gas reservoirs include the Marcellus (New York), New Albany (Ohio River Valley), Barnett (north Texas), Bakken (North Dakota), and Woodford (Oklahoma) Shales. The Marcellus and Barnett plays are especially active because both are relatively shallow and are found near large potential markets.

These two plays, however, are also under investigation by environmental agencies because of complaints by residents that their drinking water is being contaminated. Operators in both areas have been sued by homeowners and water companies who claim that fracturing fluids are leaking into shallow groundwater aquifers. Since federal law exempts hydraulic fracturing fluids from EPA (Environmental Protection Agency) regulation, plaintiffs claim that the companies do not reveal what chemicals are present in them.

What chemicals are used varies from well to well and from company to company (two of the biggest players in the fracturing business are Baker-Hughes and Halliburton). Though the chemicals are known to regulatory agencies, the "recipes" are trade secrets. Substances like toluene and methanol – both of which are carcinogenic – are used in very low concentrations in most fracking jobs. If a job calls for one million gallons of fluid, however; even a concentration of less than two per cent (a number cited by the industry) would leave 20,000 gallons of chemicals in the subsurface.

The oil and gas industry has mounted a campaign to fend off lawsuits, which begins by assuring the public that fracture technology has been in use for decades without such problems. This is, in fact, true: fracture technology has been used for decades without ill effects. Remember, however, that in the past fracturing was most common in reservoirs miles below the surface. Development of shale gas is most active in shallower deposits, where drilling is cheaper. Shale gas fracturing jobs thus take place closer to the surface; plus fracturing often extends along thousands of feet of horizontal well instead of around the twelve-inch diameter of a vertical well. The biggest difference may be that in conventional exploration, a reservoir is fractured and its seal remains intact. In a shale gas play, the seal is what is being fractured. Under these very different conditions, prior experience may not be a valid predictor.

Industry arguments are, in general, defensive: fracking has been safe in the past, chemically-treated water is carefully disposed of, and the chemicals are judged safe by local environmental agencies (even if the U. S. EPA does not regulate them). Still, independent laboratory tests have shown groundwater contamination near some shale gas developments. In these cases, contamination and drilling appear to be linked in time and space; so studies by regulatory agencies are ongoing.

The industry also campaigns on the basis of what they call “energy independence” as well as “homeland security,” because some estimates of the volume of shale gas in the U. S. place it at a ninety-year supply. Although the industry’s chauvinism may remind cynics of Samuel Johnson’s musings that “patriotism is the last refuge of a scoundrel,” the need to develop this valuable resource cannot be denied. Even with that need in mind, it is vital that regulators do not lose sight of the fact that clean water is even more essential. A balance must be reached, and the first step in reaching balance is careful study of the effects of hydraulic fracturing in shale gas development. If that study shows that fracking can, and has, contaminated groundwater supplies; then the next reasonable step would be to develop chemical mixtures to reduce harmful effects of contamination. No doubt, Halliburton and Baker-Hughes are already working on such new recipes.

For more information:
Does Fracking Cause Earthquakes?
American Petroleum Institute
U. S. Environmental Protection Agency
New York Times

Why Does Gasoline Cost So Much, Daddy?

Basics of the Petroleum Industry VI: The Economics of Big Oil (and Your Local Gas Station)

For most of us, our chief exposure to the economics of the oil industry comes in the form of two-foot-high letters displayed somewhere along the streets we travel to work or play. Though we may not know the current price of a barrel of crude oil¹ - may not even know how big a barrel of oil is² - we are usually aware of the price of gasoline in our neighborhood. What most of us don't know, as a rule, is why gasoline costs what it does. The answer is simple on the surface, and devilishly complex below that simple answer.

One simple fact is that oil companies, no matter how large or small, do not set the price of their product. Crude oil and refined products are commodities, like corn and pork bellies; and the price of commodities are by commodity traders who broker deals between sellers and buyers. Traders perform a balancing act between the least a seller will accept for the product and the most a buyer will pay for it. According to the law of supply and demand, buyers will pay more for a commodity when supply decreases. That's why whenever there is a restriction in the supply of oil production within or imports to the USA, the price rises. Even more, whenever there is fear of a reduced supply - due to weather, natural disaster, or political instability - the price also rises. In fall of 2008, the price of oil fell dramatically because of the belief that that economic upheaval would reduce demand for petroleum in large markets like Southeast Asia. The same supply and demand cycle affects beef and milk (mad cow disease, anyone?) and corn and soy beans: like farmers who are paid less for crops after a good growing season, oil companies get less for their product when the supply exceeds the demand.

Remember, too, that the cost of the raw materials (crude oil) is only about 65% of the price of your gasoline: there are also the costs of transporting the crude oil to a refinery, refining it, and transporting the refined product to your local station; not to mention the cost of the additives, most of which are also petroleum products. Besides the cost of producing, transporting, and refining the gasoline you bought on the way to work today, the station that sold you that gasoline also has to pay for the property and building (a small station can easily cost more than a million dollars to build and equip), employees, and the rights to sell that particular brand - very few stations that sell Exxon gasoline, for instance, are owned by the company. Most are owned by local business-men and -women. Oh, and one more cost: taxes. On top of a federal tax of 18.4 cents per gallon, every state (and some large cities) also charges "road-use" taxes. Depending on where you live, taxes range from a total of 26.4 cents/gallon (Alaska) to 65.8 cents/gallon in California (see a list of US state tax burdens here). Internationally, except for a few petroleum-exporting countries such that subsidize the price of gasoline (e.g., Venezuela and Saudi Arabia), taxes can be even higher; though the proceeds are frequently used to pay for public transportation.

Remember the twenty gallons of gasoline that cost you fifty bucks this morning? The station probably made less than a dollar of net profit - that's why they want you to come inside and buy snacks in their convenience store. Back in the mid-nineties, when oil was at nine dollars per barrel, the company I worked for made most of its profit off "The four Cs"- cigarettes, coke, chicken, and condoms - in their chain of convenience stores, and actually lost money selling gasoline. If you really want to make a gas station owner happy, come inside and pay $1.59 for a bottle of water after you're done pumping - you may double his profit on your visit.

What should you take away from this? First, oil companies don't set the price of their product -- they're at the mercy of the law of supply and demand. Sure, when prices are set high they can rack up substantial profits, but when prices fall, they'll take it in the shorts. Second, the guy in the local gas station doesn't arbitrarily jack up the price to try to fleece you: the station owner has plenty of costs to cover, not just the price of the raw material - and it's fairly likely that the station isn't making a great deal of money off the sale of gasoline in the first place.

This is number six in a series of minilectures on the oil industry:

1) Where Does Oil Come From?
2) Where Do Oil Companies Find Oil?
3) How Do Oil Companies Find Oil?
4) The Economics of Petroleum Exploration and Production
5) Refining 
6) The Economics of Big Oil <== You are here.  The next installments is:
7) The Future of Oil


¹ If you're curious, it's displayed to the right of this blog entry (assuming the gadget is working today)
² A barrel is 42 US gallons, a smidgen less than 159 liters, or just under 35 imperial gallons. It's a unit of measurement, however, not a physical container: petroleum and petroleum products aren't poured into 42-gallon drums and shipped; it's pumped into large tank trucks, rail cars, and tanker ships; or they're pumped in a continuous stream through a pipeline.

copyright © 2009-2016 scmrak

Statistics Never Lie - but Liars Use Statistics

If you’ve visited your local Valero gas station lately, you might have noticed a little political theater right there at the pumps. Not content with spending their money on K Street lobbyists in hopes of influencing the government in their favor, the Texas-based oil and gas company has instituted a “grass-roots” campaign in hopes of quashing climate legislation. Like most, although not all, other fossil-fuel companies, Valero’s management (led by CEO William R. Klesse) is staunchly – almost virulently – opposed to climate legislation. This may in part reflect the extreme rightward political leanings of former Oklahoma congressman Don Nickles, a board member, but is a position that is in no way unusual at the top of the industry. Rank-and-file employees, especially scientists (of which there are few on boards of directors) are less hard-line, by the way.

All that means, however, that Valero has begun displaying posters at company stations (many former Diamond Shamrock sites) flatly stating that the Waxman-Markey climate legislation passed by the House of Representatives this past summer is, in the words of Klesse, “a hidden tax.” Klesse further claims that “more than a million high-paying jobs will disappear from our already weakened economy, with no measurable improvement in global climate change.” Perhaps Klesse is concerned that one of them will be his, for which he was compensated to the tune of $10.5 million in 2008 (per Forbes). Valero’s poster, attributed to an organization called Voices for Energy (apparently another name for “Valero”) repeats Klesse’s statements, and states flatly that the Waxman-Markey bill will raise the price of a gallon of gasoline by seventy-seven cents - or more!!! democracydata.com, the domain hosting Voices for Energy, is a Virginia-based political consulting organization that terms itself specialists “in database management and zip to district matching supporting virtually any sort of grassroots lobbying activity.” Grassroots my ass: it’s just astroturf.

So anyway, let’s get to the claim of “77 cents per gallon.”

The impression left by the wild-eyed Uncle Sam is that, if Waxman-Markey passes, your gasoline will cost at least 77 cents more per gallon the next day. However, the 77-cent estimate comes from a compilation of studies performed by the American Petroleum Institute (API), an industry trade association and advocacy group, and represents their estimate of the increase ten years out in 2019 (ignoring inflation, if any). API didn’t crunch the numbers themselves, however; they used numbers from a study published by EIA, the Energy Information Administration (the statistical agency of the U. S. Department of Energy, nominally independent). To sum up that study: EIA estimates that if energy markets were to continue unchanged, the average price of a gallon of gasoline in 2019 would be $3.62/gallon. With Waxman-Markey in place (unchanged from its current form), EIA estimates a best-case scenario of $3.74/gallon and a worst-case scenario of $4.29/gallon – the 65-cent difference is due at least in part to variable estimates of the effectiveness of carbon offsets in reducing costs. The API’s, and Valero’s, 77-cent “estimate” is that worst-case scenario, in which no refiner or producer reduces costs by a single penny – perhaps out of distaste for the practice of using carbon offsets…

The EIA figures are used by the Congressional Budget Office (CBO, the non-partisan agency that provides economic data to the legislature), which has estimated that the use of all available carbon offsets would cut the cost of the cap-and-trade legislation by 70%, or about 54 cents of that worst-case scenario. CBO, by the way, calls the API figures “extreme” and protests that the use of the EIA’s 77-cent figure misrepresents the non-partisan group’s calculations.

Undeterred by the protests of non-partisan statistical organizations, however, the API not only continues to quote that 77-cent figure, but has also allied itself with that paragon of non-partisanship, the Heritage Foundation, to figure out on a state-by-state basis how much the cap-and-trade will “cost” people.


Both EIA and CBO have stated that the effects of using carbon offsets, details of which are still vague, on the ultimate costs can't be reliably calculated - which is part of the reason for the sixty-five cent spread in their estimates. For the API to use only the estimate that best supports their cause is, however, to be expected. It's akin to a Celtics fan shouting that The Sporting News says his team will will 80 games this year when the article says "between 60 and 80." And, of course, the Nets fans will sneer that the News said the Celtics would only win 60...

As always, the best policy is to take the Heritage Foundation’s numbers, add them to Ralph Nader’s, and divide by two… To recap: statistics never lie, but liars use statistics - only they don't use all of them. The API is cherry-picking...