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July 25th, 2008

Talk About Irony

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A US Geological Survey released this week revealed a new hot spot for oil – the Arctic. Part of a four-year study, the report discovered the potential for 90 barrels of oil and 1.7 trillion cubic feet of natural gas.

According to the Wall Street Journal:

In all, the Arctic has about 20% of the world’s recoverable oil and gas reserves—if recoverable is the right word.

The oil reserves sound pretty big—but they would supply just under three years of global consumption at current rates. Or, twelve years if it all went just for the U.S. The Arctic reserves might bring a little relief to tight markets, but they don’t look like the answer to declining production in oil fields in the rest of the world.

Once restricted because of huge, freighter-crushing ice, the Arctic’s Northwest Passage is now ice free, making new oil and gas fields at least some what accessible. Plans to drill in the northern most region could develop in the next 10-20 years, but cost remains a major issue in the harsh environment.

From Reportonbusiness.com:

…drilling and transportation become increasingly expensive as you move north.

For example, pipelines, such as the one planned to exploit natural gas in Canada’s Mackenzie Delta and Alaska will cost roughly $1.5- to $2-million per mile. More northerly and offshore pipelines could cost four or five times that.

Democrats and environmentalists have barely had time to recover since the President lifted a ban this month that could allow drilling off the east coast of the US (Congress rejected the possibility immediately).

It does seem quite ironic that global warming has provided us a way to produce more global warming. Perhaps as soon as Antarctica warms up a tad more, we’ll explore there too.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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