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A melting Arctic could be good news for mankind, according to a new study.  (Source: SciAddict)

An earlier map of the USGS estimates of untapped Arctic gas reserves. Brighter areas indicate more gas.  (Source: USGS)

A similar map shows oil reserves, here the darker regions represent regions more rich in probable oil deposits.  (Source: USGS)
New study shows yet another potential benefit of a warmer planet

A new study adds to growing evidence that the current warming cycle may hold potential benefits to mankind.  According to a study by the U.S. Geological Survey, earlier estimates which placed untapped Arctic oil reserves at as much as 90 billion barrels actually fell short -- the Arctic may in fact hold as many as 160 billion barrels of oil.  The new discovery amounts to over 35 years in US foreign oil imports or 5 years’ worth of global oil consumption.   Canada, Greenland/Denmark, Norway, Russia and the United States, all of which border the Arctic Circle are racing to compete for the untapped resource.

The oil reserves could fetch a price of $10.6 trillion dollars at current oil prices.  Most of the reserves are in shallow waters -- less than 500 meters (about 1/3rd of a mile) -- making extraction relatively easy.  Geologist Donald Gautier comments, "It would not mean that there would be any kind of a significant shift in global oil balance.  But this is especially significant for the Arctic nations."

Oil companies are already racing to pinpoint deposits and begin to tap this bountiful resource.  Exxon Mobil and several others have staked claims and began drilling in the Mackenzie Delta, the Barents Sea, the Sverdrup Basin, and offshore Alaska.   According to Alan Jeffers, a spokesperson for Exxon Mobil, "It makes sense to diversify sources of oil and gas, given that the U.S. is one of the biggest consumers of oil and gas."

As rich as the Arctic may be in oil, it may hold even more natural gas.  While the geologists estimate 13 percent of the world's undiscovered oil lies in the region, they also estimate that the region holds 30 percent of the planet's undiscovered natural gas reserves.  Natural gas harvested in the region could be used for a variety of purposes including home heating and power generation.

The discoveries are part of an ongoing USGS study CARA -- Circum-Arctic Resource Appraisal.  The study is the first of its kind as researchers are using advanced geological analysis and probability modeling to estimate the reserves held in the Arctic shelves.  While probabilistic models come with a degree of uncertainty, this multidiscipline approach is yielding exciting results and has already led to the discovery of several major deposits.

Despite the potential gains to economic and national security gains that could come from tapping this resource, environmentalists are seeking to block oil companies from drilling in the region, complaining it will release arsenic, mercury and lead into the ocean waters.  All of these compounds naturally occur in low quantities in sea water.  Activist Lisa Speer, Director of the International Oceans Program at the Natural Resources Defense Council, in a interview adds, "We need uniform, mandatory standards governing offshore oil and gas activity in the Arctic because activity in one country has the potential to affect the environment of the Arctic far beyond the country of origin."

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By Ringold on 6/1/2009 4:37:21 PM , Rating: 2
Lets now also forget the whole Wall Street fiasco when companies were buying oil futures/contracts and not taking delivery then selling them at a higher price.

If the line of discussion is still supply and demand, the above is actually an example of market actors attempting to more locate equilibrium pricing. Without getting bogged down in how options traders work, if they're buying a commodity and selling it higher that means the producer sold too cheaply to begin with. Market traders would thus be capturing some 'producer surplus'. If it doesn't make sense, one has to understand what supply and demand schedules/curves really are.

Paul Krugman last year had some great blog posts explaining in detail why the speculator paranoia was largely just that, paranoia. And Krugman is the most famous liberal economist out there, and a Nobel prize winner.

Now why oil prices are going back up while tons of supply is sitting in tankers moored around the world from when the price crashed with the global economy, I'm not sure. Does it take time to offload it and get that oil back to market? Does it have something to do with some global production being shut in due to prices being too low for a while? I don't know, but I for one am trying to not look at short periods of time and trying to find sinister things in market oscillations. Dirt cheap oil was, apparently, no more sustainable than than $140 oil.

Ah, and a lot of traders seem to laugh on CNBC at the idea the OPEC 'cartel' actually controls its output. They pretty commonly point out that members lie about their reserves (upon which quotas are set) and most then produce beyond their quota anyway. Not all of them and not always, but OPEC's not all-powerful.

By Regs on 6/1/2009 6:29:23 PM , Rating: 2
If you asked me it's because of factor-costs, the supply curve. If oil becomes too cheap to sustain a profit for a lot of oil drillers or refineries, they will cut back production and move onto other investments like alternative energy or simply buy capital or a stake into another company.

If they cut back, that means there are less players in the field to handle the supply. So you're right that it's part of the invisible hand theory.

However what happens when consumers have no viable alternatives or substitute? We need oil to heat our homes, drive to work (a lot of industry has moved out the city and are spread far apart), transport our goods over land to retailers and wholesalers, and so forth.

"This is from the It's a science website." -- Rush Limbaugh
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