THE VINE APRIL 16, 2010
Many observers were puzzled last week when President Obama announced his support for expanded offshore oil drilling. Was he trying to win over Republican swing votes for a climate bill? Head off the inevitable anger over summer gas prices? Perhaps. But here's another possibility: The move could have been intended to bolster international support for sanctions on Iran. At least that's what events from the nuclear summit earlier this week suggest.
On Monday, Obama apparently convinced Chinese President Hu Jintao to pursue sanctions as a means of dissuading Iran from developing its nuclear program. As Time noted, "Obama reportedly indicated that the U.S. would help China make up any shortfall in oil imports resulting from Iranian retaliation for any Chinese support for sanctions." China is concerned about its growing reliance on crude imports and possible disruptions in the global oil markets. So Obama's offshore-drilling embrace may have been intended to signal that he's doing everything possible to avoid that fate.
Of course, it's worth examining just how much offshore drilling can achieve here. Iran, after all, plays a huge role on the international oil markets—with estimated reserves of 130 billion barrels and daily production of 3.8 million barrels. By contrast, the offshore-drilling areas that the Obama administration is now studying off Alaska and the mid-Atlantic region are estimated to contain, according to the Interior Department, 62.6 billion barrels of economically recoverable oil at most. What's more, that oil isn't all coming out tomorrow: A 2007 study from the Energy Information Administration suggested it will take at least five years before U.S. offshore oil drilling can begin.
In all, according to Steven David of Johns Hopkins, expanding U.S. oil production "could help around the edges" to blunt any Iranian reaction to eventual sanctions. But, David adds, offshore drilling in the United States wouldn't have nearly as big an impact as other oil-production moves elsewhere in the world—such as encouraging Saudi Arabia to boost its production or convincing Mexico to develop its oil reserves in the Gulf.
Then again, offshore drilling isn't the only domestic policy Obama's pursuing here. The stricter fuel-efficiency standards recently announced by the administration will add some near-term slack to the oil markets. The government estimates that increased mileage standards will save a total of 1.8 billion barrels of oil by 2016. If all those savings aren't guzzled up elsewhere, then the United States could theoretically replace nearly half of the current Iranian reserves by the midterm of the next administration. That could have helped Obama convince Hu to take a harder line on Iran's nuclear program without being quite so afraid of the ramifications for the oil markets.
It's also worth noting that, regardless of how Iran reacts in response to further sanctions, the country's oil production is likely to continue to decline. Before its oil industry was nationalized in the 1979 revolution, Iran was producing about five million barrels per day. More recently—thanks in part to the effects of sanctions—the country is down to about three million barrels per day. This has led some experts to question whether Iran's reserves are even as large as claimed. Dr. Samsam Bakhtiari, a former executive at the National Iranian Oil Company, suggests that Iranian estimates are “almost one hundred [billion barrels] over any realistic assay.”
Corbin Hiar is a freelance writer in Washington, D.C.
(Flickr photo credit: State Department)