Exxon Mobil Corp. announced last week that it had made two major oil discoveries and one natural gas find in the deepwater Gulf of Mexico.
The company estimates that the new wells could produce about 700 million barrels of oil equivalent.
News of the find made the rounds on all the major media outlets, and there were plenty of folks leaving comments about how this will help us end our reliance on foreign oil.
What a joke!
700 million barrels is a drop in the bucket. Just last month we imported 362 million barrels. Based on those numbers, that 700 million-barrel find, would displace our imports for less than two months. And that's if you could actually produce it fast enough. Which you cannot.
By the way, it's not all crude. Want an eye-opener? Check out this analysis of Exxon's “major” find.
I'm also looking forward to seeing what it's going to cost to produce this stuff. In 2007, rig rentals for ultra-deepwater projects ran at about $460,000 a day – or about $170 million per year!
Of course, with oil prices only going up from here, don't think for a second that it won't be worth it.
Listen: I won't argue the economics. With $100 + oil, this is definitely a profitable venture. But it ain't going to make your 87 Octane cost any less, and it sure as hell isn't going to stop the flow of foreign oil.
So good news for Exxon and its shareholders, but it still doesn't change the fact that we simply cannot supply our insatiable demand for oil with domestic resources. It is physically impossible. And every time we cheer these discoveries as solutions instead of transitional measures that can buy as a little more time, we become more and more vulnerable to the realities of peak oil.
Thankfully, by the time Exxon actually starts producing this stuff, gasoline will likely run you about $8 a gallon. And at that price, the market's influence on consumer behavior will lead to greater acceptance of electric cars, mass transit and more walkable communities.
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