John McCain's "Big" Economic Plans|Dr. Thoma is a Dweeb P2

The post "John McCain's "Big" Economic Plans" seems to tell me more about a Liberal Economics Professor than about McCain's Economic Plans. I can see some of the points of the first part of his post about ear-marks, but let me address the drilling issue specifically.

First I go to his link with the picture and what do I see: Drill here, drill now A pipe dream, a post by grist without comment. Which is enough to question where Dr. Thoma gets his information. Then this leads me to another link of: Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf. The charts say January 2003. Are we to take this information as current and reflects the current reality of prices in the world market now? Let us see if it has some information that may be useful or just shallow analysis.

Although existing moratoria on leasing in the OCS will expire in 2012, the AEO2007 reference case assumes that they will be reinstated, as they have in the past. Current restrictions are therefore assumed to prevail for the remainder of the projection period, with no exploration or development allowed in areas currently unavailable to leasing. The OCS access case assumes that the current moratoria will not be reinstated, and that exploration and development of resources in those areas will begin in 2012.

Well no wonder that the yellow in the graph does not start until 2015. Let me put some of Dr. Thoma's words in here:

I can't even see the sliver of yellow until after 2015, and even after that it's not much of a contribution. That's supposed to lower gas prices?

With such a solid foundation for the polcy porposals - a couple of slivers of pie - I can't imagine why the McCain campaign would resort to lies, deceptions, misdirection, and misleading characterizations to sell these "big" plans.

But as noted above we are basing this on the moratorium until 2012 and if it was enacted now that makes the start as 4 years earlier and with prices higher then there is more urgency to get more supplies to market. To the larger issues, the paragraph above from EIA says that the present restrictions would continue. Back to EIA:

For AEO2007, an OCS access case was prepared to examine the potential impacts of the lifting of Federal restrictions on access to the OCS in the Pacific, the Atlantic, and the eastern Gulf of Mexico. Currently, except for a relatively small tract in the eastern Gulf, resources in those areas are legally off limits to exploration and development. Mean estimates from the MMS indicate that technically recoverable resources currently off limits in the lower 48 OCS total 18 billion barrels of crude oil and 77 trillion cubic feet of natural gas (Table 10).

Are we to conclude that 18 billion barrels of recoverable resources could only net .2 million more barrels per day when ANWR has predictions of 1 million barrels more per day? That seems to be quite a stretch to say so little will be produced from so much.

We still have not seen any indication that prices have any effect on production when in reality we know as economists that prices have effects on quantity supplied to the market. But lastly if Cuban oil renews embargo debate/Discovery of sizeable reserves means U.S. trade ban may finally have a cost, then I am sure we could increase our production of OCS oil to the market at least as well as the Cubans can do. The article does not mention any projections for oil production but we could easily see that 1 million per day is possible.

Seven months later, a report by the U.S. Geological Survey confirmed it: The North Cuba Basin held a substantial quantity of oil — 4.6 billion to 9.3 billion barrels of crude and 9.8 trillion to 21.8 trillion cubic feet of natural gas. Cuba wasted no time, dividing the 74,000 square mile (120,000 square kilometer) area into 59 exploration blocks, and then welcoming foreign oil conglomerates with offers of production-sharing agreements.

Lastly back to Dr Thoma in the comments section again:

You'll hear a lot of attempts to discredit these numbers, but nobody has really done so, and even if you increase or decrease the yellow area by, say, 50% it doesn't change the picture much, so it's all just a lot of noise about a very small contribution to satisfying our energy needs.

But what if the yellow areas is 4 years earlier and 5 times broader? Then what? What if Venezuela cuts off oil? What if another war breaks out in the ME? What is the value of having resources at home instead of getting oil from unsavory characters? What about the externalities of the above as well as causing a major trade imbalance?

Do we use the same standard in alternative fuels as we do with oil? No one talked about how much bio-fuels was going to reduce our costs for gas when in reality it raises our costs. When building our damns, did we say well this will only supply 3% of our energy needs? When all these windmill farms sprung up did we calculate how much energy it would produce as a percentage of the total energy needs?

P.S.: I guess 1 million is a little overly optimistic for Cuban production but I did find one report that claims:

In December 2004, the Cuban regime of Fidel Castro announced that it had
discovered a significant oil reserve off the northwest coast of the island.
More importantly, the potential of the oil finds could dramatically decrease
the island’s dependence on imported oil and could serve as boon to the Cuban
economy. There has been much conjecture of the size and scope of oil
reserves in the 59 offshore tracts in Cuban exclusive economic zone (EEZ).
The working estimates are that there is the potential for 120 thousand barrels
of oil per day, perhaps more, but the sea floor is over a mile deep and the oil
reserves perhaps an additional 3,000 feet beneath the sea floor. This lies
within the capacity of the existing oil drilling technology, but as previously
explained, the task of extracting the oil will have to be undertaken using second-
or third-generation technology because of U.S. export control regulations
against trading with Cuba. The challenge for Cuban oil development
policy makers is to simultaneously pursue frontier exploration in the Gulf of
Mexico, while continuing to produce from the existing mature oil reserves
with higher levels of efficiency and environmental integrity. Add to this challenge
the additional question of securing the appropriate technology for the
task. {Page 40|48PDF}
http://web.gc.cuny.edu/bildnercenter/cuba/documents/CITBookFMpdfbychapter_000.pdf

The point is still that 18 billion barrels to produce only 200,000 barrels per day compared to tiny Cuba producing 120,000 barrels per day.