I think it's a combination of net cost, net energy, speed of development, infrastructure required to transport it efficiently to refineries, and the prohibitive cost of drilling safely. PR is a concern, but not much more than PR in any other spill. The largest problem is spill damages will cost an order of magnitude more to prevent/stop/clean because the arctic is so remote and all effort there is less efficient.
PR is not the only cost of the Deepwater Horizon. BP also paid a significant fraction of their market cap to clean up the wide-reaching effects of the spill.
There are behavioral costs. Everyone knows _which_ major oil company was to blame for letting a drunk ship captain navigate the Valdez oil tanker. I was in grade school at the time and I still remember the images of birds, fish, and other wildlife caked in oil slowly dying and the name of the oil company was forever etched into my mind next to those images.
The Arctic is some of the most inhospitable weather in the world. Everything costs more to develop, transport, and maintain there. The seasonal weather prevents ships from making the trip there without an ice breaker escort (or more than one if the ice breaker is stranded on ice). The energy required to perform much of the work (keeping machines above freezing temperatures, keeping oil/gas warm to transport in pipelines) isn't insignificant. Oil platforms may need to be re-engineered to withstand the weather and floating ice sheets.
The costs associated with drilling are high until the drillers find the largest pockets.
It's also worth noting that Royal Dutch Shell is among the only major oil companies that actively and openly admits that climate change is an issue, that people are at least partly to blame, and that the oil/energy companies have a responsibility to both factor in the risk factors as well as work on mitigating the contributions of oil/gas to climate change.[1]
Chevron (US) seems to agree that Climate change is man-made, though they aren't nearly so direct about it and certainly don't express support for a carbon tax. http://www.chevron.com/globalissues/climatechange/
Exxon (US) seems to take it as a given that human-emitted greenhouse gasses cause climate change and emphasizes the need to avoid needless cost in solutions. They explicitly support a carbon tax, offset by lowering other taxes: http://corporate.exxonmobil.com/en/current-issues/climate-po...
> The largest problem is spill damages will cost an order of magnitude more to prevent/stop/clean because the arctic is so remote and all effort there is less efficient.
Actually, I'd guess that an offshore Arctic oil spill could be much cheaper. There aren't any capabilities to clean one up, so they wouldn't.
(For example, in the 2010 BP spill: "In summer 2010, approximately 47,000 people and 7,000 vessels were involved in the project." [1] Even with ideal weather, nothing close to that would be possible in the Arctic.)
This is 100% not true. Shell's Arctic response plan was approved by various regulatory agencies and was deemed adequate. In situ burning, dispersants, mechanical recovery.
Note that 10,000 people were on the ground cleaning up Valdez and that sort of disaster is as easily mitigated as a spill from a well (can't really cap a ship). There's no reason to believe Shell couldn't mobilize as many or more.
> BP also paid a significant fraction of their market cap to clean up the wide-reaching effects of the spill.
Some money did go to environmental cleanup.
But a large proportion of it is going to pet projects. Two especially egregious projects in my home state are a plan for gigabit Internet and to dam one of the largest undammed rivers in the US to create two recreational lakes with a waterpark in the middle of nowhere.
Not BP's fault, of course - you can lay that firmly at the feet of local businesses, the well-connected, and local governments. Still, when you see "BP paid out $X for the oil spill", remember that a lot of that had nothing to do with restoration.
There are many cheaper sources of oil right now. Drillers will be back in future decades, but right now, it's not worth it.
Saudi thinking on the future of oil is interesting. They're worried about solar, wind, natural gas, electric cars, and US oil reducing demand for their product. And at some point, they'll run out. When a middle-east oil autocracy runs out of oil, Government leaders are usually killed. Egypt and Syria peaked in the mid-1990s, and look what happened. Saudi Arabia claims to be a long way from that point, but it's hard to tell.
Twitter is the perfect fit for the Republican intellect. What does Jeb's reply even mean? "More anti-energy than Obama" is totally meaningless, unless his point is that a +50% increase in crude oil production was achieved in spite of Obama's anti-energy policies, whatever they are.
I submitted this because I'm very curious what HN thinks. Clearly USGS thinks there's a heck of a lot of oil in the Arctic. I'm personally glad we're not drilling for oil because that's not an environment we can screw up and fix and there's no need to do so except for profit - but why would Shell's tests come back "disappointing" or is that really then owning up to not being able to drill without mishaps (and damage to their PR) in the region?
I don't think they came back 'disappointing' and I don't think they are worried about PR. I think the cost of extracting is not worth it with the current price and current political risk (a moratorium? higher fees? etc)
Exactly. Shell isn't at all worried about their reputation. They find Greenpeace amusing more than anything. Arctic oil is expensive and at current prices just isn't profitable.
Watch to see if they keep the drilling licenses or sell them off to another play with more cash like ExxonMobil.
I agree with the other people in this thread who have said it's expensive and with low prices, not necessarily worth it.
That being said, it's worth noting that Shell's exploration was offshore, in the Arctic Ocean, though the majority of current Alaskan production is onshore (or barely offshore) in Prudhoe Bay and the vicinity, mostly by BP with some collaboration with Exxon and Chevron. Onshore production is, all else equal, much less expensive because it's a lot easier. This is even more true in the Arctic where seasonal sea ice might make it impossible to set up a multiyear drilling platform like in the Gulf of Mexico, and drilling might have to be from ships instead of big floating rigs.
As far as I know, this won't impact North Slope (e.g. Prudhoe Bay or ANWR) production.
The key thing to remember is that if we burn all the oil we've already found, we'll exceed safe levels of atmospheric carbon. So there is no point exploring for more oil or opening new reserves.
> If you're desperate you can always squeeze a peanut or scrape a duck.
That sounds terribly expensive. A 1,000% increase in the cost of plastics and lubricants won't be fun for anyone.
> ...we can make by other means, if we have energy.
Hopefully we gather together the political will and launch the anti-misinformation campaigns required to get some form of very-high-capacity non-fossil-fuel-based electricity generation system long before we need to seriously consider "scraping ducks" to get the hydrocarbons we require.
Fertilisers are made of the elements NPK, none of which are found in oil; natural gas is used to power the process and as an intermediate in ammonia production, but it's not intrinsic to the process.
(Running out of mineable phosphates is a separate "peak" issue)
Apologies. I was being unforgivably imprecise. I should have used the phrase "fossil fuel(s)" instead of the word oil.
> ...natural gas is used to power the process and as an intermediate in ammonia production, but it's not intrinsic to the process.
Maybe I'm misreading the Forbes [0] article, but it says:
> We take methane (the majority part of natural gas) and use the CH4 to fix the nitrogen (N) from the air to make ammonia (NH3) which is then the precursor for the various fertilisers themselves like ammonium nitrate (NH4NO3) say.
That sounds to me like natural gas is -currently- a vital part of the production process, as well as a power generation fuel. That's -naturally- not to say that a different methane source couldn't be used.
[0] Unrelated: Forbes links are always fun. The first time I load an article, I am taken to a "welcome" page whose URL is not the article I intended to load. My back stack is also destroyed, so the back button doesn't work. If I visit the intended URL a second time, I get to read what it was that I wanted to read in the first place. Yaay.
If you want to know more about how realistic implementing substantive technological changes will be before we hit 500 ppm CO2 or some other benchmark, I submitted a link to a talk by Vaclav Smil, who is one of the world's experts on energy and society: https://news.ycombinator.com/item?id=10291516
Even granting the first sentence, the second doesn't follow. Some sources of oil are cheaper or easier to get to than others; you could put a 100% enforceable ban on oil burning over some limit X, and it would still make sense to explore for oil.
But in the real world a simple limit can't be enforced. We're unlikely to avoid going over the limit unless we put a price on carbon emissions to make burning fossil fuels more expensive. Searching for cheaper fossil fuels is exactly the opposite course of action.
If oil is cheaper on average, you need a higher price on carbon to have the same effect. If you manage to get that higher price, the end result is the same as if your cost of production didn't drop in the first place. So why invest in dropping the cost of production?
That's assuming the government's goal is to raise revenue. A lot of carbon tax proposals are revenue neutral, with the goal of achieving specific carbon reductions.
Fossil fuel producers may still compete with each other on cost but we shouldn't fool ourselves into thinking they're somehow benefiting society by doing that.
~85% of the US's energy usage comes from fossil fuels [1]. Despite the unfortunate reality of anthropogenic climate change, the really key thing to realize is that transitions to alternate forms of energy take decades because the scale of such transitions is absolutely enormous; these changes take longer and longer with every major transition, i.e. wood to coal, or coal to oil; oil to whatever's next could take a century [2]. The earth has about 1300 billion barrels of 'proven' oil reserves[3] which at current consumption rates of ~100 million barrels per day [4] gives us about 36 years of oil left. And that assumes that, despite rapid increases in population size and economic development, that consumption won't change.
36 years isn't very long to develop the new energy technology, test it sufficiently, and build the infrastructure. Oil is the hardest to replace of all of our energy sources because it has the highest energy density and is therefore integral to transportation. Replacing coal with solar + nuclear would be a better option because both are based on stationary power plants instead of car engines and jet turbines. But in reality, if oil gets expensive now, we'll just start burning more coal because the pieces are already in place.
Like it or not (I definitely do not like it), we are a society very reliant upon fossil fuels, and if fossil fuel accessibility is restricted substantially (i.e. by completely stopping oil exploration) there will be considerable destabilization of society, which will do two particularly nasty things: 1) Harm the poor disproportionately, by making it difficult or impossible for the poor in developed nations to heat their houses and drive to work and school, and raising the cost of food substantially; and by completely stopping if not reversing the economic development of the rest of the world, keeping billions in poverty. 2) Wreak tremendous havoc on the environment, as the forests are cut down to provide wood for heating and cooking, and the fisheries and wild animal stock is razed due to high food prices.
There are no great solutions to the problem, but there are some that are much better than the current status quo of doing nothing, or the opposite end-member solution of enforcing an otherwise unlikely peak oil catastrophe by stopping exploration. Taxing carbon and using the proceeds to fund new energy technology as well as ramping up current alternative energy production both domestically and in India and Africa, and implementing more efficient transportation, heating and electricity generation could go a long way.
Agreed. Though the harm to rich society does not have to be that big: taxes already make energy rather expensive in some rich countries and people cope. The consumer doesn't really care whether energy is expensive because of taxes or because of scarcity.
I guess they're both right - there's plenty of oil but turning a profit on extracting it will take too long to justify the investment. As you probably noticed the price of oil has fallen substantially in recent years as hydraulic fracturing has really taken off and (most of) the logistical and environmental difficulties have been managed away. I've seen more than one analyst suggest that it might be 25 years before we see $100/barrel oil prices again barring some calamity like a major war. I don't know what sort of time frame oil industry strategists use but I imagine they'd need a big new investment to become profitable within 5-7 years or it becomes very hard to justify to shareholders.
While fracking has become more popular in the last few years, the big reason for low oil prices at the moment is the Saudis. They saw $billions in investments in the various drilling, etc efforts and decided to flood the market to kill their competition and sacrifice profits now to keep their dominance in the long run.
From a purely economic perspective, it's a good move on their part.
Actually, it's mostly related to a falloff in demand:
"After mid-2014, the lion’s share of the decline in oil prices has been caused by negative oil-specific demand shocks and, to a lesser extent, by negative aggregate demand shocks. In contrast, the role of the oil supply (understood as the current physical availability of crude oil) has been small."
I don't believe Shell. I believe this is a PR tactic to throw off their opponents. I've seen other companies do so. They'll find some way to keep exploring and doing whatever they can get away with.
Not really. Hiding activity in the Arctic isn't exactly easy and if Exxon wants to know what they're up to, they can just check Shell's filings with the EPA and State of Alaska.
PR is not the only cost of the Deepwater Horizon. BP also paid a significant fraction of their market cap to clean up the wide-reaching effects of the spill.
There are behavioral costs. Everyone knows _which_ major oil company was to blame for letting a drunk ship captain navigate the Valdez oil tanker. I was in grade school at the time and I still remember the images of birds, fish, and other wildlife caked in oil slowly dying and the name of the oil company was forever etched into my mind next to those images.
The Arctic is some of the most inhospitable weather in the world. Everything costs more to develop, transport, and maintain there. The seasonal weather prevents ships from making the trip there without an ice breaker escort (or more than one if the ice breaker is stranded on ice). The energy required to perform much of the work (keeping machines above freezing temperatures, keeping oil/gas warm to transport in pipelines) isn't insignificant. Oil platforms may need to be re-engineered to withstand the weather and floating ice sheets.
The costs associated with drilling are high until the drillers find the largest pockets.
It's also worth noting that Royal Dutch Shell is among the only major oil companies that actively and openly admits that climate change is an issue, that people are at least partly to blame, and that the oil/energy companies have a responsibility to both factor in the risk factors as well as work on mitigating the contributions of oil/gas to climate change.[1]
[1] http://www.shell.com/global/environment-society/environment/...