Gail the Actuary points to an interesting claim about deep offshore oil drilling potential. Gary P. Luquette, President of Chevron North America Exploration and Production Co., argues that Outer Continental Shelf (OCS) oil drilling could add a substantial amount to our oil supplies.

The good news: the OCS has significant potential. Over time, it could add 1 million more barrels of oil and natural gas equivalent a day--potentially representing a fifth of the current total U.S. oil production. Advances in technology could increase that amount dramatically.

Some people believe that if the United States just opens up currently closed off areas for drilling oil then there'd be so much the US wouldn't need to import any oil and oil would be real cheap. Well, the world is currently using about 86 million barrels of oil per day and the United States is using almost 19 million barrels per day (down from 20.5 million before the oil price spike and recession). While another million barrels per day would help the US economically it would not cause a huge change in the overall oil supply picture. 1 million barrels per day would displace less than 10% of current US oil imports.

If the US is lucky the OCS oil might provide a decade's worth of oil. You might ask what happens after that decade is over. But it can't be pumped out that fast anyway.

The U.S. government estimates that the Gulf of Mexico holds somewhere around 70 billion barrels of oil, 40 billion of which remain undiscovered in the deep water. Combined with the entire Outer Continental Shelf, there's thought to be more than 85 billion barrels of undiscovered crude off the coast of the U.S., more than a decade's worth of oil at our current pace.

Oil extraction is limited by flow rates of oil underground. The OCS oil will take decades to extract.

85 billion barrels might sound like a lot of oil. But the world goes thru over 30 billion barrels per year and demand is rising due to economic growth, especially in Asia.

I expect remaining undeveloped US OCS areas to get opened up for drilling after another really big spike in oil prices. But even if that spike occurs in, say, 2012 we realistically wouldn't see substantial oil flowing for 10 years. OCS exploration and development takes a long time. "Drill, baby, drill" for US OCS oil isn't a short term solution to high energy costs.

OCS development involves very high costs and so it requires continued high oil prices. The days of cheap oil are over. We need substitutes.