I often write about energy production in the USA, so I could not let last week's testimony by a representative of the GAO before a congressional committee go unmentioned. Indeed, what was said in that committee is probably the most explosive news of the 2012. Of course, it has gotten almost no play in the media. Here is the main point of what was said: In the shale which is located in the Green River Formation under Colorado, Utah and Wyoming, there is about three trillion barrels of oil. About half of that oil is recoverable under current methods. What this means is that in this one field, there is more recoverable oil than in all of the world's proven reserves put together. Let me say that again. In just one shale formation in the Western USA, we have more recoverable oil than in all the other active fields in the world.
President Obama, of course, has been going around the country for years telling Americans that we have 2% of the world's oil but use 25% of the production. I often write about what a big lie that claim is, but here is a representative of the government itself confirming just how big a lie Obama is telling us. To make it worse, over three quarters of the land in the Green River formation is owned by the federal government. Obama could open this land to drilling right now. In a few short years, we would have enormous new sources of oil right here in America. Instead of doing that, Obama is cutting off development of federal lands. Since Obama took office, he has managed to cut oil production on federal land by about 12%.
Because of the size of the oil deposits at Green River, it is worth taking a look at just what production of those deposits would mean for the USA.
1) Since the much of the land is federal, there would be an initial payment to the government for the rights to drill there. This could mean huge up front payments to the government. In addition, there would be a royalty of at least one-eighth of revenue paid to the government on the production. Using $100 per barrel as the price of oil, the revenue to the government would be something like $13 trillion dollars. This is nearly enough, by itself, to pay off the national debt.
2) If the oil from the Green River formation gets produced, the USA will no longer need to import oil from abroad. That will mean that the current cost we incur of roughly three quarters of a trillion dollars per year for imported energy will go away. Imagine that. It would be like having a stimulus package every year into the future. Even better, the funds would be spread around the economy and not just sent to Democrat interest groups for the most part. This would increase the national rate of economic growth by at least 2% per year.
3) The folks who own the other quarter of the land out there in the Green River formation will become quite wealthy, to say the least. These funds, too, will move through the economy and promote growth.
4) Hundreds of thousands if not millions of jobs will be created as part of the oil recovery industry and associated sectors.
5) The income tax on the companies and individuals who profit from the oil production will go to the federal treasury and will add trillions of dollars more in revenue which can help cover federal expenditures.
6) At some point, the price of oil will decline due to increased production. While this may lessen some of the benefits mentioned above, it will also provide a major stimulus for further American economic growth. That means more jobs and less need for government spending.
7) A decline in the world price of oil will reduce the power of countries like Iran and Venezuela that use oil revenues for nefarious purposes. Just imagine what happens in Iran when the government loses half of its revenues.
There is more to the story, but this is enough to get the picture.
So the good news is that the USA has enough oil right here to meet its own needs for the foreseeable future. The bad news is that Obama does not want that to happen.
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