The Romney-Ryan Energy Plan and Jed Clampett

Take a listen to this Earl Scruggs tune as we read the Romney-Ryan Energy Plan. They are promising energy independence on a platform that is essentially “drill baby drill” - as they cite some claim from the Institute for Energy Research that we have 1.4 trillion barrels of technically recoverable oil, which they claim would satisfy U.S. energy needs for the next two centuries. The Institute also notes a speech by Thomas Donohue of the Chamber of Commerce:

Our nation is on the cusp of an energy boom that is already creating hundreds of thousands of jobs, revitalizing entire communities, and reinvigorating American manufacturing. Unconventional oil and natural gas development is on pace to create more than 300,000 jobs by 2015 in Ohio, New York, Pennsylvania, and West Virginia alone. Take a look at what’s happening in North Dakota. The state is booming. Unemployment is at 3.4%. Oil production just surpassed that of Ecuador—one of the members of OPEC. Energy is a game changer for the United States. It is, as the saying goes, “the next big thing.” With the right policies, the oil and natural gas industry could create more than 1 million jobs by 2018. Not only can we create jobs, but we can cut our dependence on overseas imports while adding hundreds of billions of dollars to government coffers in the coming years.

Yep – in 8 years, we will all be like Jed Clampett loading up our trucks and moving to Beverly:

Come and listen to a story about a man named Jed / A poor mountaineer, barely kept his family fed / Then one day he was shootin at some food / And up through the ground came a bubblin crude. / Oil that is, black gold, Texas tea.

Oil bubbling up in everyone’s backyard does sound like a stretch and what the Institute is claiming differs sharply from what this Congressional Research Service report notes:

U.S. proved reserves of oil total 19.1 billion barrels, reserves of natural gas total 244.7 trillion cubic feet, and natural gas liquids reserves of 9.3 billion barrels. Undiscovered technically recoverable oil in the United States is 145.5 billion barrels, and undiscovered technically recoverable natural gas is 1,162.7 trillion cubic feet. The demonstrated reserve base for coal is 488 billion short tons, of which 261 billion short tons are considered technically recoverable.

But what does “undiscovered technically recoverable” even mean. This document puts this in perspective:

Excluding the United States, the world holds an estimated 565 billion barrels (bbo) of undiscovered, technically recoverable conventional oil; 5,606 trillion cubic feet (tcf) of undiscovered, technically recoverable conventional natural gas; and 167 billion barrels of undiscovered, technically recoverable natural gas liquids (NGL), according to a new assessment by the U.S. Geological Survey (USGS) released today ... All of these numbers represent technically recoverable oil and gas resources, which are those quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations. This assessment does not include reserves – accumulations of oil or gas that have been discovered, are well-defined, and are considered economically viable.

So we have 20 percent of the undiscovered, technically recoverable conventional oil reserves in the world that may not be economically viable. I’m not sure that Romney-Ryan quite grasp the figures that they are touting. The private sector would certainly have to consider the private marginal cost of discovering and extracting any such oil, which likely would seriously understate the social marginal cost of producing oil. I wonder if Romney-Ryan has forgotten about the BP Gulf Oil Spill?