Obama Calls McCain's Bluff on Drilling

Coming just the day after Exxon announced the largest quarterly profit in the history of the Earth, Barack Obama's announced willingness to consider the proposed Senate compromise to allow the possibility of new and limited oil drilling leases seemed a bit curious. When you drill down a little deeper -- pardon the pun -- you can see where he's going with this. Obama is actually calling McCain and Big Oil's bluff. Let me explain.

In my June 30 post, I laid out in some detail how McCain and Charlie Crist were carrying Big Oil's public relations water on this issue. The oil companies have been trying to change the subject away from their huge profits. They argue instead that the real reason for high gasoline prices is not their market power and greed, and not OPEC's power and greed. Rather, it's the government's fault for not letting them drill more. Forget the fact that they haven't drilled on most of the sea beds they have already leased. Forget the fact that they are not refining at full capacity. The real problem, they say, is that they can't drill more American oil for Americans.

This, of course, is nonsense, and a smokescreen for profiteering. Gasoline is expensive, first, because the nation-states that run OPEC control most of the supply. Gasoline is expensive, second, because Exxon and its cohorts are along for the ride, claiming that they "only" make ten cents on every dollar of revenue. That's ten cents per dollar, not ten cents per gallon. So that when their "revenue" on a gallon of gas went from $2 to $4.50, their profit on that same gallon went from twenty cents to forty-five. It is the only business where the cost of materials go up, and profits don't go down. They go up. What a business.

So, just like Bush convinced Americans that Saddam caused 9-11 and was an imminent threat to nuke us, Bush and McCain have temporarily convinced a majority of Americans that prices will go down if we just let Exxon drill. And it's that celebrity Obama who won't let them.

So why won't Obama just hunker down like he did with the summer gas-tax holiday and continue to explain that the drilling issue is a fraud? Here's one reason why: Bush and McCain have been making the argument that if we just let the world markets know that we're considering opening up more of our seabeds for drilling, the "psychological" effects on the market will cause the price of gasoline to come down. What they actually expect is that.

They are probably right about that. I hate to be a cynical conspiracy theorist, but sometimes even paranoids have enemies. The Saudis and other OPEC members like the Republican status quo. They see that $4 gasoline may spur Americans to action and -- shudder the thought -- change. The American oil companies (American in name only) certainly like the Republican status quo. Call me paranoid, but look at 2006: the price at the pump went from over $3 in August, 2006 to about $2.20 by election day. There was not a similar drop in 2004, but those who control the price of oil could still point to the destruction of the Iraqi oil industry and a busy hurricane season in the Gulf of Mexico to justify high prices.

Bush and McCain want to trap Obama and help their pals in Houston at the same time. If, as they expect, the price of gasoline goes down and it takes some pressure off the economy, they can say it's because they took leadership on drilling while Obama dawdled, just as Joe Lieberman tried to suggest on Meet the Press yesterday. If the greedy stay greedy and the price stays high, they can blame the tree-hugging, coral-loving Democrats for not making it happen faster.

The Senate compromise allows Obama to call their bluff. We need to know more about the compromise, but as reported, any drilling that actually happens under the compromise will require waivers from the individual states and, importantly, the Department of Defense, which I'm told has no patience for this. Obama will also insist on extremely stringent environmental protections and oversight. Third, if there were new leases, the oil companies may actually have to pay market prices for them. Because almost all of the leases currently in place were negotiated by the Reagan and Bush I Administrations, you can imagine how well the oil companies did. (I agree with the recent Huffington Post column by Jared Bernstein, in which he argues that Big Oil wants to tie up cheap leases while their friends are still in power.) And, most importantly, the compromise would require Big Oil to give up its lucrative and ridiculous tax subsidies, and the money saved from the subsidies would fund research and development of alternative energy. While McCain says he's all for alternative energy, it's kind of like No Child Left Behind -- he doesn't want to help pay for it, especially if it's going to come out of the pockets of the oil companies.

So, imagine if Senate Democrats and Republicans -- all of whom say they are appalled by Big Oil's profiteering - actually agreed on a comprehensive energy policy that would help fund alternative energy by cutting Big Oil's tax breaks, but allowed for the possibility of extremely limited drilling 50 miles off the coast, if the states and the DOD allowed it, for which Big Oil would have to pay market rates. The oil companies, McCain and Bush may actually say "no, thanks," and their bluff will have been called.

Comments

[Harod]

This is starting to remind me of a Ayn Rand novel where the government kept tinkering and tinkering with the steel industry unitl they ran it into the ground then a bridge colapsed acrossed the Mississipi and thier wasnt enough steel to repair it and everyone in NYC starved to death...

[DCX2]

Obama should also change the language being used in this debate. The media generally confuses leasing with drilling. OCS and ANWR are about leasing, not drilling. If they wanted to drill, there is already other land to drill.

[bryansmith]

Being a Democrat in this debate kind of feels like getting slapped by a girl after someone else copped a feel. The Republicans have been groping America for years, and now they are trying to shift the blame. We cannot get slapped for this.

[rflctammt]

Excellent article! I appreciate your outlining this highly relevent information. I think we all need to know and understand more about this!

Members of my local Obama on-line group are asking for specific facts and details to use in "discussions" with friends and collegues who have opposing political views. (And perhaps those far-left who would call Obama a flip-flopper or sell-out?) This not only cuts to the quick of very important issues, it also reveals the deviousness of the oil companies and the McCain/RNC - and also the foresightedness and intelligence of Obama!

(Also, I would like to know more about the seabeds that these oil companies already have leased but are not drilling on....???? Keith Olbermann mentioned it, but I haven't been able to find out anything more about it. Seems like this would also be pertinent information...)

Thanks again for a great article!

[bryansmith]

Being a Democrat in this debate kind of feels like getting slapped by a girl after someone else copped a feel. The Republicans have been groping America for years, and now they are trying to shift the blame. We cannot get slapped for this.

[Craig]

I suspect your analysis is correct. Thanks for making it so clear.

[kjdwyer]

If this is indeed the idea, then why not say it? Why can't Obama say,

"Fine, Bush, McCain, Exxon et al, I call your bluff. We all know that the issue isn't your ability to drill offshore -- you already have sufficient leases to do that. I think you're using this as a land grab (or in this case a off-shore lease grab). We all know that the earliest you'd be able to start extracting oil out of these sites is around 10 years from now, so fine. We'll make some concessions regarding further off-shore leases, but it won't be cheap and you lose your tax breaks. Furthermore, any further off shore leases will only be granted if you begin the process of extraction on at least 10% of your existing leases."

This is my problem with all of the political maneuvering. If the situation is as we all say it is, WHY NOT JUST SAY IT? Don't do it through a vote, appearing to back-pedal in the process. CALL THEM OUT.

[Alan Fein - Huffpost Blogger]

kddwyer - you are a smart guy (or girl). Your comments are always good, especially the complimentary ones! i think if you look at what obama said today, he basically came out and said it, with the exception of the 10% part. He said 7 years instead of 10, using the white houses best figures, and basically said that it was deceptive to suggest that drilling was any kind of short term fix - and as a long term fix, no better than us inflating our tires. We want him to call them liars and cheats, just like many people wanted him to to be tougher on the Clintons. But I think this guy knows who he is at the core, and is very cognizant of, and disciplined about, his tone.

[UnbiasView]

He then contradicts himself:

Release oil from SPR . . . so 1 million barrels a day will make a big impact for a couple weeks but ANWR's 1 million barrels a day for years won't?

[kjdwyer]

I understand fully what you're saying about being "cognizant of his tone," but I feel that we're missing an unique opportunity to seize this issue and confront the oil companies head on.

There is TREMENDOUS discontent among the electorate over the price at the pump. Why NOT take a harsher tone? Why NOT challenge the oil companies to start drilling on their existing leases? Most americans don't realize that the oil companies are already sitting on millions of acres of previously leased property and by challenging them in this way, you both get the word out to the electorate and you put the oil companies on the defensive.

The "manufactured consent" (Chomsky) of americans for releasing previously banned sites for off-shore drilling happened because they didn't know the full story. How else do you get the message out if the candidate is not willing to make these kind of challenges? We know the MSM is in the pocket of big oil. However, if Obama actually made this kind of challenge openly, both in speeches and in advertising, the MSM would have no choice but to report it.

Regarding "tone," we're far too school-marmish in our response to the irrational right. In the absense of a more forceful condemnation of their b.s., they have not only "manufactured consent," but they have constructed an entire industry around the products of misinformation and distraction. Again, when we have an opportunity like this, why not CALL THEM OUT !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!?

[Horace McMillon - Huffpost Blogger]

I am concerned about how long it took Obama to reach this position. I am not sure that Obama realizes that politics is only partially rational. Politics and the decision making process many, maybe most people use is also visceral. Right now people are so pressed and burdened by the squeeze from the increases cost of food and fuel that they want something- anything done. My late father used to have a phrase, 'do something even if it's wrong'. Right now Americans are in a mood to support any and everything that could possibly give them relief. Obama's failure to recognize this and get in front of it has costs him and given the McCain camp a legitimate club with which to whack him. He should have taken this position a long time ago. Going forward, if Obama is not faster getting ahead of the curve, the Dems and progressives will lose another one.

[debrouillard]

I disagree with your assessment. We arent as ignorant as we used to be. The MSM doesnt dictate everything these days and people are beginning to come to term with the carefully thought plan or idea is worth 10,000 quick fixes on a fly. After all the reason we are at this stage today is because of the 10,000 quick fixes of yester years.

[gladys46]

I guess my legal background causes me to think ... where is the crime until or unless it's committed!! I take your point Horace with one exception ... evidence is never suppressed if it's clear & present! I mean, O IMO, allows the attacks to be perfectly clear ... I think he knows exactly what his strategies are.

[ImmanuelGoldstein]

I agree. I am firmly convinced that the American electorate and polititcal system has lost the capacity to respond rationally to basic challenges of any kind. Good Sense practically has to be slipped in the back door.

[PAposter]

Thanks for the post, Mr. Fein.

[MPeter]

I agree with the article. He is calling their bluff. Before long, the oil companies, Bush and the Rethugs will be singing another tune. But alteast, Obama will have exposed them for the hypocrites they really are.

[sfbayani]

I will be all for politics of expedience.
Let him win first, and we'll fight!
I just want to get rid of Bush and McSame.
Tis all ...

[plebeianswillrevolt]

Tell you the truth.... Obama stood up against Hillary with the gas tax holiday..... now he wants to drill off shore and tap the petroleum reserve. I call that pandering.

[nomobull]

too bad you are wrong

[SusaninIN]

I would call it compromise and I agree with the author it's a great way to call McCain's bluff. I knew Obama was smart. It will definitely be nice to have an intelligent president again.

[PAposter]

Did you even read the article?

[LeftRight]

So...... When are you going to read the article?

[RedKnuckles]

be sure to read not only the words in big typeface at the top, but also all those little words that follow it....they were all written for a reason.