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Of Titan, Polar Bears, and Global Oil Markets

January 21, 2005

Saturn's moon Titan is a dreamscape for fossil fuel aficionados. The hefty moon, whose diameter is 40 percent the width of Earth's, apparently is chock-full of methane, the main ingredient in what we commonly call natural gas. The amazing Huygens space probe that landed on Titan's surface has brought us evidence of Titan's hydrocarbon cornucopia - methane seas, methane rivers, even methane rain. Visions of exploding stock options must dance in gas company CEO heads at the very thought of methane seas filled with methane rain.

Alas, Titan's gassy abundance is utterly inaccessible and will remain so for the indefinite future. Titan is a remote wilderness lying 800 million miles away and gripped by deathly cold temperatures that approach 300 degrees below zero. Harvesting Titan's stores of methane would be a colossal undertaking far beyond our current means. Just sending the Cassini-Huygens probes to visit the Saturnian system and have a look around cost $3 billion. For all practical purposes, Titan is a dry hole .

So why bring the matter up? It's a somewhat fanciful way of shedding light on a point that sometimes gets lost in down-to-Earth energy debates. The utility of fossil energy is determined not so much by the physical quantities of fuel lying around, but the costs of hoisting them up and then using them.

Take the Arctic National Wildlife Refuge, for example. Proponents of opening the refuge to oil drilling assert that up to 16 billion barrels of "technically recoverable" petroleum lie beneath the coastal plain where caribou and polar bears roam. That's the high end of the estimated range. Even if it's correct, it doesn't follow that 16 billion barrels are there for the taking. The availability of the oil would depend on the economics of producing it, which is a function of market price. At a price of $40 per barrel, odds are 50-50 that 6.6 billion barrels would be economically recoverable, according to U.S. Geological Survey estimates.

The economics of producing the oil do not account for other costs. Say 6.6 billion barrels could be pumped from the refuge over 20 or 30 years and sold at a price earning oil companies a profit. While 6.6 billion barrels sounds like a lot, it isn't much in the context of the global market where oil is bought and sold. And therein lies another cost - the energy security problem that drilling the Arctic refuge wouldn't solve. With America's daily consumption at 20 million barrels per day, we are heavily dependent on an energy resource that we must buy in a global market subject to pricing pressures and supply risks that we have little influence over.

Matters are not likely to get any better. The largest oil reserves are concentrated in highly insecure places. Two-thirds of the world's proven reserves, about 650 billion barrels, are in five nations around the Persian Gulf, a vexing region with both very low production costs and extreme political volatility.

In coming years, the Middle East will account for a larger share of world production. By 2030, OPEC nations are expected to account for 60 percent of global production, a 50 percent increase from today's proportion. Competition for supplies will get tougher as demand from China and other developing nations rises - increasing the risks of price shock and international conflict. Such risks are real costs that often show up in pump prices and pricing volatility.

Yet another cost would be disfiguring one of the few places left in the nation where the original American wilderness can be experienced on an epic scale. While it's hard to put a pricetag on lost wilderness, the cost is undeniable. Then, there are the potentially vast costs of global warming -- the dead elephant in the living room that politicians tiptoe around.

Oil won't run out anytime soon, but America's heavy dependence on oil comes at a high cost. Oil dependence is a strategic liability and an environmental hazard. Drilling the Arctic refuge is a distraction that would perpetuate our unhealthy oil dependence. A better solution is to lower our exposure to such costs by improving fuel efficiency and diversifying our energy portfolio.

There's a Titan's worth of clean energy stored inside our heads, where we'll find the money-saving ideas, technological treasures and entrepreneurial savvy to bring them to market.