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The Myth of ANWR

Secretary of the Interior Gale Norton is putting on the full-court press. First, she appeared in a strange segment of “Hannity and Colmes” where the usually nasty Sean Hannity pitched her only softballs. Seeking affirmation from the other end of the spectrum, her March 14th editorial in the New York “Times” waxes poetic about the remarkable scientific advances in oil exploration. Norton has brought out the pom-poms and the creased skirt to root for ANWR drilling. Unlike other Bush appointees who have sometimes objected to their cheerleading duties…Norton probably has never met a strip mine she doesn’t like. She loves nature…but loves exploiting its resources even more.

Both sides in the “debate” over ANWR talk around realities. No one knows how invasive or difficult retrieving the oil would be. The techniques to explore have modernized, but they still might be spread out to the point that one surface location might not work. The caribou won’t mind crews trolling around the dark tundra in winter, but come summer they will have to adjust to any man-made improvements. On balance however, few good arguments seem to exist against “exploration”. Drilling is a whole other issue. Especially because that oil would be used to end our dependence on foreign sources.

That assumption, however, is false.

Most American oil companies are less than thrilled to try their luck. And even if they do, they are hardly obligated to sell what is recovered there to the US. Transcontinental oil pipelines are almost non existent in the US. Alaska is a long way by ship to New Orleans or East Coast hubs which serve the majority of America’s refineries. Add in an eventual decrease in the US population and it’s a paradox. Just as ANWR’s black bounty would reduce America’s burden on foreign sources, so will the country’s demand of oil and petroleum products also decline. So why is Norton so eager to forge ahead?

In a word: China.

Its state-owned oil companies have had difficulty buying fields in foreign countries. As a result, China has to buy much of its oil on the open market. The sense of desperation is so strong, that the China National Offshore Oil Company has signed deals with Iran and now the Sudan. Each poses a risky investment, given the tenuous future of each regime. ANWR is the exact opposite: a remote location in a completely stable country not that far away from Asia. But certainly, there would be much political opposition to allowing a Chinese state-owned company to plant its flag in Alaska. As a result, one of the three nationalized firms, CNOOC, Sino-pec and China National Petroleum Corporation, would likely set up a subsidiary in Hong Kong. Supporting Hong Kong erases much of the political opposition, but it also solves a few other problems.

China has a huge trade deficit with the US, meaning it has every reason to buy American Treasuries to stabilize the value of its own products. Hong Kong has a trade deficit with the US (though not very large). Hong Kong holds a the fourth-largest amount of US Treasuries. In fact, Hong Kong is unique for holding so many US bonds, despite its positive balance of trade. Unlike China, Japan, and other countries, Hong Kong selling her Treasuries would not affect its trade relationship with the US. If the Special Administrative Region started to sell ANWR’s oil however, every regime would likely pay in US currency. That would reinforce Hong Kong’s need to stockpile a certain amount of US currency.

Such a scenario is at ten to fifteen years away, however. It will take at least that long to investigate the viable areas for drilling, and then build the necessary infrastructure. That is why Norton suggesting that ANWR can do much to alleviate any current energy woes is disingenuous. The stark reality is that only Iraq has enough excess capacity to drive down the price of oil anytime soon. And retrieving it will require peace and stability, not technological advances.
posted by Thomas at 5:34 PM 0 comments