That was my answer the last time I was asked whether the ban on offshore drilling would be lifted. Granted, crude prices at the time were moving past $140 per barrel. We all know what came next. Prices dropped sharply, as low as $112.88 per barrel last week.

This morning, I was asked the same question. Since oil prices are no longer in record territory, has my answer changed?

Not a chance.

Can you blame me? Just take a look at the hole we've dug for ourselves. On a global scale, fossil fuels still make up approximately 86% of the world's energy supply. Although U.S. demand has fallen off recently, the fact is we still consume roughly one quarter of the world's 85 million barrels/day production.

Our massive thirst for oil, however, isn't the scary part.

According to the EIA, the U.S. imported about 10 million barrels of crude oil per day in June. Even though Canada is still our single largest source for crude oil, over 55% of our crude imports were from OPEC.

Naturally, OPEC's interest is in higher oil prices. That makes perfect sense, considering the oil cartel controls about 40% of the world's oil production. I also wouldn't count on the organization to sit idle, twiddling their thumbs. When OPEC gets together in Vienna on September 9, the group only has two options: either maintain or cut current production.

If we listen to OPEC's numbers, the oil markets are oversupplied by a million barrels per day. In order to defend higher oil prices, OPEC hawks have already started to call for a cut in production.

Reducing foreign oil imports is no longer a question for the U.S., it's a necessity.

In other words, the U.S. will be looking to boost its domestic oil production.

Opening Up Domestic Crude Oil Production

Unfortunately, there's no quick fix to the problem.

The last time we talked about drilling ANWR, the question wasn't whether it would ever become open for drillers. We know it will, eventually. The problem, however, is the amount of time it will take producers to reach a significant amount of production.

The Energy Information Administration has reported the U.S. won't see production until 2018. Even then, production would reach a peak of only 780,000 barrels per day in 2027.

Over the last few months, people have been in the dark as to why it would take such a long time to see ANWR production. In fact, I've been told that ANWR oil could be flowing within two years.

Here's how the EIA breaks down the production timeline in their Analysis of Crude Oil Production in the Arctic National Wildlife Refuge:

• 2 to 3 years to obtain leases, including the development of a U.S. Bureau of Land Management (BLM) leasing program, which includes approval of an Environmental Impact Statement, the collection and analysis of seismic data, and the auction and award of leases.

• Another 2 to 3 years to drill a single exploratory well. Exploratory wells are slower to drill because geophysical data are collected during drilling, e.g., rock cores and well logs. Typically, Alaska North Slope exploration wells take two full winter seasons to reach the desired depth.

• 1 to 2 years to develop a production development plan and obtain BLM approval for that plan, if a commercial reservoir is discovered. Considerably more time could be required if the discovered oil reservoir is very deep, is filled with heavy oil, or is highly faulted. The petroleum company might have to collect more seismic data or drill delineation wells to confirm that the deposit is commercial.

• Finally, 3 to 4 years to construct the feeder pipelines; to fabricate oil separation and treatment plants, and transport them up from the lower-48 States to the North Slope by ocean barge; construct drilling pads; drill to depth; and complete the wells.

That 10-year timeline wouldn't even begin until the Congressional ban is lifted. As you can see, the idea of seeing production in two years is not only unlikely, it's laughable.

We can see the same problem with the latest push to open up the Outer Continental Shelf.

Although it would it will take years for initial production, we're told that opening the OCS would mean an immediate relief for gasoline prices. Sadly, that's not the case since production from offshore drilling would only make up 1.4% of our demand in 2025.

Drilling in both these areas will happen, whether we like it or not. Until the restrictions are lifted, however, there are much better opportunities to focus on. Next week, I'll show you one of the few places where domestic oil production is actually growing.

Until next time,

Keith Kohl

P.S. Just because a company is located in a hot play doesn't automatically make it a winner. In fact, one of the fundamental parts of a drilling company is its production. Many of my Energy and Capital readers are playing one of the most active drillers in the Bakken right now. If you're interested in joining them, feel free to check out the $20 Trillion Report.