July 30, 2000
NRDC Backgrounder: Jobs in the Arctic Refuge: Myth Versus Reality
CONTACT: Chuck Clusen or Elliott Negin at 202-289-6868
Proponents of drilling in the Arctic National Wildlife Refuge have argued that oil development there would create 750,000 jobs, but their numbers are based on a flawed 1990 study commissioned by the American Petroleum Institute (API). According to subsequent independent studies, the API study used highly questionable economic analysis and exaggerated estimates.
A 1994 study by the Economic Policy Institute concluded that the total number of jobs generated by drilling in the refuge would be fewer than 8 percent than what the API study predicted, and even those would last only five years. Meanwhile, a 1993 study, conducted by the Tellus Institute for The Wilderness Society, concluded that initiatives to improve vehicle fuel efficiency and non-transport energy efficiency would result in nearly 10 times as many jobs as drilling in the Arctic Refuge.
Arctic Refuge Oil Would Not Affect World Oil Prices
The API study rests on the assumption that the oil from the Arctic National Wildlife Refuge coastal plain would lower world prices by 5 percent even though it acknowledges that the amount of oil in the coastal plain amounts to less than 1 percent of the world’s proven oil reserves. This assumption can be refuted on a number of grounds (for more detail, see “Jobs and the Environment,” by the Economic Policy Institute (1994)):
· Over the last decade, even the oil companies have conceded there is no connection between Alaska oil production and international oil prices. The United States, which has less than 3 percent of the world’s oil reserves, has too little to influence world prices.
· The API study is based on the projection that the Arctic Refuge coastal plain would yield 9.2 billion barrels of oil. The U.S. Geological Survey estimates that there is only 3.2 billion barrels of economically recoverable oil at $20 per barrel in the refuge – less than six months of the amount of oil Americans consume today.
· The study’s assumption about the lowering of world oil prices assumes that the initial price of oil would be nearly $58 per barrel in 2000. In fact, oil prices currently are hovering around $25 per barrel.
· The assumption about the Arctic Refuge oil’s impact on world oil prices also assumes OPEC would not lower its production in response to a larger U.S. supply.
To make a case that oil development in the Arctic Refuge would generate jobs, the API study projects that, in the long run, lower world oil prices would boost U.S. gross national product (GNP). This increase in GNP then would generate lower levels of unemployment. A much more sensible calculation of job gains instead would attribute gains to an increase in demand for labor and domestic capital goods generated by oil development.
EPI and Tellus reached dramatically different conclusions:
· The 1994 study by the Economic Policy Institute (EPI), which attributes job-creation benefits to increases in demand (not to an unlikely sequence of events), found that the number of new jobs – about 55,000 – would be less than 8 percent of those predicted by the API study.
· The 1993 study by the Tellus Institute for The Wilderness Society concluded that initiatives to improve vehicle fuel efficiency and non-transport energy efficiency would result in nearly 10 times as many jobs as drilling in the Arctic Refuge.
· Earlier this year, a report by the University of Alaska’s Institute of Social and Economic Research found that about one quarter of Alaska’s permanent, full-time, direct jobs – nearly 84,000 – “depend in one way or another on the state’s fish, wildlife, scenic beauty, recreational opportunities and public lands.”
References
Breslow, Marc, John Stutz, and Frank Ackerman, “Creating Jobs for the ’90s: A Report to the Wilderness Society,” Tellus Institute, 1993.
Colt, Steve, “The Economic Importance of Alaska’s Healthy Ecosystems,” University of Alaska, Institute of Social and Economic Research, 2001.
Goodstein, E.B., “Jobs and the Environment: The Myth of National Tradeoffs,” Economic Policy Institute, 1993.
Wharton Econometric Forecasting Associates, “The Economic Impact of ANWR Development,” American Petroleum Institute, 1990.
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The Natural Resources Defense Council is a national, non-profit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 500,000 members nationwide, served from offices in New York, Washington, Los Angeles and San Francisco. More information is available through NRDC’s Web site at www.nrdc.org.