Map of northern Alaska and nearby parts of Canada showing locations of the Arctic National Wildlife Refuge (ANWR), the 1002 area, and the National Petroleum Reserve—Alaska (NPRA). Source: USGSMyth: Opening the Arctic National Wildlife Refuge (ANWR) in Alaska to oil exploration will (1) reduce our dependence on imported oil, and (2) put downward pressure on oil prices.

Evidence:  To what extent can ANWR reduce our reliance on oil imports and diminish OPEC’s ability to manipulate oil prices? This depends on three factors:  the quantity of oil in ANWR, the rate at it which can be developed and extracted, and how that quantity compares to world oil production.

Federal law currently prohibits oil and natural gas development in ANWR.  ANWR is located on the northern coast of Alaska due east of both Prudhoe Bay, the largest oil field ever discovered in the United States, and the National Petroleum Reserve-Alaska (NPRA) (Figure 1).  In 1998, the United States Geological Survey (USGS) estimated that between 5.7 and 16.0 billion barrels of technically recoverable oil are in the coastal plain area of ANWR (also referred to as the 1002 Area), with a mean estimate of 10.4 billion barrels, of which 7.7 billion barrels falls within the Federal portion of the ANWR 1002 Area.  In comparison, the estimated volume of undiscovered, technically recoverable oil in the rest of the United States is about 120 billion barrels.

The Energy Information Administration (EIA) of the U.S. Department of Energy used the USGS data to assess how quickly the oil in ANWR could be brought to market.  If development commenced in 2008, the first oil would flow a decade later in 2018. The EIA assumed that much of the oil resources in ANWR, like the other oil resources on Alaska's North Slope, could be profitably developed given the current (2008) levels of technology and at current and projected oil prices. In general, fields are assumed to take 3 to 4 years to reach peak production, maintain peak production for 3 to 4 years, and then decline until they are no longer profitable and are closed.  In the mean oil resource case, ANWR oil production peaks at 780,000 barrels per day in 2027.   Cumulative oil production resulting from the opening of ANWR from 2018 through 2030 amounts to 2.6 billion barrels in the mean resource case.

With respect to the world oil price impact, projected ANWR oil production constitutes between 0.4 and 1.2 percent of total world oil consumption in 2030, based on the low and high resource cases, respectively. Consequently, ANWR oil production is not projected to have a large impact on world oil prices.  Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.
 

Every barrel of ANWR oil production reduces crude oil imports by about a barrel. In turn, the reduction in oil import volumes also reduces the level of expenditures on crude oil and liquid fuel imports. According to the EIA, cumulative net U.S. expenditures on imported oil and liquid fuels will cost about $2.9 trillion (2006 dollars) between 2018 and 2030. The mean oil resource case for ANWR reduces this import expenditure by $202 billion dollars, or about 7 percent. 

Result: False in the case of reduced oil prices. True in the case of reduced oil imports (modestly).

Sources

• Energy Information Administration, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, Report #: SR-OIAF/2008-03, May 2008.
• U.S. Department of Interior, U.S. Geological Survey, The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Open File Report 98-34, 1999.