If We Drill in the US, We Don't Get the Oil
One thing has been driving me crazy about this drilling debate -- everyone seems to assume that if we drill for oil in the US, that we will get the oil. And hence, we won't be dependent on foreign oil anymore. But we won't get anything, Exxon-Mobil will.
The oil that comes from that drilling will not be United States property (Republicans aren't suggesting we nationalize the oil companies, are they?). It will be the property of whichever oil company got the rights to that contract. They can then sell it to whoever they like -- and they will. They will sell it on the world market, so the Chinese will have just as much access to the oil that comes out of the coast of Florida as we will.
The Democrats have done a decent job of beating back the argument that this will effect prices in the short run, or even in the long run. But no one has addressed the point above. The Republicans make it seem like we won't be dependent on foreign oil -- and that prices will go down in the US -- if we have our own oil. But it won't be ours. And it will be sold on the world market, so its effect on global oil prices will be even smaller.
When we ask the question of whether there should be drilling off the coast of Florida or in the Arctic National Wildlife Refuge, we should ask the question this way -- would you be comfortable with the Chinese or the Germans or Russians or the Saudis drilling on American land? Because for all intents and purposes, they will be.
Large multi-national firms like Exxon-Mobil are not US property. They sell to the world and their allegiance is to corporate profits. So, when they drill, they drill for the whole world, not just us. Some might find that heart-warming, but it certainly has nothing to do with the US having more oil or lower prices.
Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
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This debate has a simple solution. Allow them to drill, but modify the terms of the lease to say that every drop of oil, every cc of natural gas, every last product that comes from federal land, may only be sold in the USA. None of it can be sold overseas. This will ensure that we actually get the resources that are there, and that it is not merely an asset grab that we get nothing from.
It may or may not actually get us any oil, but it will at least keep them from turning the coastline into a tarball just so they can sell more oil to China.
Forget oil drilling. Get rid of the ban on HEMP and get our corporatist gubbmint off our backs please !
THANK YOU!!!
Cenk, tell your listeners / viewers / readers to take pick up a globe and measure the distance from Alaska to China. Then have them run their fingers all the way down the coast of North AND South America, then back up to the Gulf Coast -- that will make it clear where the ANWR oil would wind up going, as the Panama Canal isn't big enough for tankers and most of our refineries are on the Gulf Coast. No oil company in its right mind would take a 15,000 mile journey when they can stop 6,000 miles away in Asia for a quicker turnaround time.
A fundamental change in our driving habits is now required.
The Automobile Industry is going to be in the same position as the Airline Industry in the next few months. Unless we get away from gas combustion vehicles, including Hybrids, the automobile industry (as we know it) will die.We need to make drastic moves. America needs to move to ELECTRIC. The vehicles are not as fast, not always as fun to drive, but the move will save Americans money (Billions) and help bring change to our automotive companies. Let's "Be Green"!!!!!!!!!!!! BG Automotive Group Ltd. has a car that will travel 80-100 miles per charge for $15,995. Finally a car that most Americans can afford. Did you know that 80% of all drivers, drive less than 50 miles per day? This new car will cost an equivalent of $0.20-0.25 cents/gallon (depending on electricity rates in your area). Why send $700 Billion per year to OPEC (now buying up U.S. companies) when we can use this money for our schools, health care, social security for all Americans, etc, etc, etc. We can make the difference if WE change.
Nope.
Mass transit.
Well, I'm poor and in the middle of the country. I can't afford any new car, let alone electric, and have no access to mass transit.
So what do I do?
I think the argument is that drilling here will increase global supply which will decrease (minimally) the global price (in about 15 years). Anyone who believes that it would provide immediate noticeable relief is an idiot. While it may be an option it is not the cure, the cure is to transition away from fossil fuels, which by the way is what Obama is proposing.
Amen!
Problem is that 60+% of the population in one poll believes that it will help prices. I forget the poll source, but I saw it on HuffPo recently. There are many, MANY idiots.....
I got news for you: The Chinese ARE already drilling in the American continental coastal shelf. It is technically in Cuban waters -- so there is nothing we can do about it.
Unlike the West Coast shelf which runs close to the shore, the US East Coast shelf is located hundreds of miles off the US beaches.
The latest news is that that's not true. It was just something that some Republican made up.
http://www.mcclatchydc.com/251/story/40776.html
So the American coastal shelf extends into Cuban waters?
I bet they call it the Cuban coastal shelf in Havana...
The US government doesn't just give the oil away.
They sell leases in a silent auction to the highest bidder. For example, lease sales netted over $3 billion for the Federal government in the Gulf of Mexico this spring. States and private property holders on land have the same right to lease their property for development.
The government and private landholders build royalty rates into the leases and recover money on each barrel or amount of gas produced as well.
Oil companies make decisions to lease properties based on a probabilistic analysis of success of finding a anticipated amount of reserves on a lease. Success rates in the Gulf of Mexico for finding commercial quantities of oil and gas are around 50%. It costs $100's of millions to find commercially viable discoveries. It costs billions of dollars and many years to bring typical deepwater successful discoveries to market.
Oil companies are given a profit on the sale of the oil in order to entise them to take the risk to develop the oil. Their profits are then taxed again after that.
It's not as if the oil is just given away. If you're unhappy with the royalty rates and leasing strategy, take it up with Congress, which sets all the lease rates through legislation.
How dare you inject fact and reason into this....
Sorry Cent, should have done some research.
First off, Cenk is 100% right. Secondly, his name isn't "Cent".
Sorry David, you should have done some research.
"The US government doesn't just give the oil away"
where in the article does it say that it does? The article rightly points out that every drop of oil we would see from opening up ANWAR or through new off shore drilling would go on the world market, just like the oil we now produce. The idea that drilling in these areas would somehow translate into more energy independence and reduce the amount of oil we import is a dangerous canard and a classic red herring argument meant to seduce low information voters into granting big oil even more largess under the guise of removing the yoke of our dependence on OPEC...
ANWR...
I concur that the Repub's and McCain's current efforts are a political sham. This is especially true of efforts to establish any causal link between new drilling areas and short term gasoline prices.
I probably wasn't clear enough, but I wanted to make sure that it was noted that these resources are just not stolen from the US. The author's comment "would you be comfortable with the Chinese or the Germans or Russians or the Saudis drilling on American land? Because for all intents and purposes, they will be," in my opinion, insinuates that resources which are the property of the US, are just taken by oil companies, with no benefit in turn to the US. This is not the case.
Well, I think that is what he's proposing.
Taking up with the Congress a few of the matters you raise.
BEFORE we let any more leases.
More importantly, you are avoiding the point he is making, which is that NEW leases will do NOTHING for the price of oil, or gas at the pump, and that IF any oil ever comes out of those holes, the oil will flow to whomever is willing to pay the highest price for that oil.
Bottom line: Granting more leaseholds does nothing to increase the US supply of oil, nor reduce the US price for gasoline.
Period.
That's not so complicated.
In case you think nobody is looking, the new lease proposals are not designed to accomplish those goals of cheaper, more plentiful gasoline for consumers.
Clearly, having read the entire Congressional Committee report on the subject, we have thousands of leases, and millions of acres of leasehold areas that are available for producing new oil and gas right now that are going unused.
So, what good does adding more acreage and leasing do?
The answer is this.
It is a resource grab.
Until the leases are let, the resource belongs to the people of the United States.
Once they are let, the resource becomes the real property of the leaseholder, jacking up its balance sheet assets with whatever geologic report it can muster.
Its a resource grab.
Both parties should be strung up for even considering it.
I would stop short of calling the congressional committee report referenced objective, and I wouldn't give yourself too much credit for reading all of it, it was pretty short . . . however, I concur with your points on gasoline prices effect and the resource grab.
Realistically, new leases in the Gulf off Florida, on the West Coast, and on the East Coast would more than likely end up in US markets, and would displace some portion of foreign import. With current infrastructure 100% of natural gas produced would end up in the US. I think a large portion of the expected reserves off Florida and the Carolina's are expected to be primarily natural gas. I don't know enough about the trans-Alaskan pipeline to say where ANWR production could end up.
Oil is a global commodity, but the physical delivery is based on contracts for supply, which makes supply routes somewhat more regional, or at least somewhat more set.
Unused acreage-that is a joke. Do you have a clue what oil and gas exploration entails, by your post I expect not. Neither time nor space allows me to to educate you on the subject but just briefly- the primary tool of exploration is 3D seismic. Drilling is the last tool in exploration and the odds of failure (dry holes) exceed the odds of success. Industry has access to 15% of the OCS yet it produces 21% of the natural gas and 30% of the oil produced in the US. Acreage is expensive and every bit of it is bought with a geological idea in mind. Prospects are developed and either high graded or condemned (by seismic). Drlg activity by itself is not a true picture of effort. We do not buy leases for the hell of it. The rig count is at a 22 year high- what do you suppose we are doing with those rigs? Well we drill wells and we are doing so to deeper depths and the per well reserves are declining which means we need access to more promising areas (the other 85% of the OCS) with larger reserve potential. You have fallen victim to the dem talking pts.
Yes, maybe 10 years from now, after Big Oil has banked their profits and investment tax credits, some of "our" oil will dribble into the market. This sham is just another example of how the Bush administration is nothing but a smokescreen for the oil industry.
Note:Well, if you wan to make Exxon oil "yours"-- buy stock in the company.
Just like I own every operating system MS publishes and every can of beer AB manufactures. That's how the system works. Buy stock in a company, get their products for free. It's so simple.
SOT
Not me.
They have to drill for new oil offshore or in the arctic or in politically unstable countries. This is expensive, risky and the return comes after years - not weeks or months.
What if they drop a billion or so of their currently fabulous profits into developing prospects that actually have commericial oil - but at $100/barrel. And what if the economy tanks, taking the price of oil with it - we use something like 20% of the 85 million barrels of oil shipped per day.
Nope - way too risky.
Yeah, you're right.
NY TIMES: "Exxon Mobil earned more than $1,287 of profit for every second of 2007."
http://www.nytimes.com/2008/02/01/business/01cnd-exxon.html?_r=1&hp&oref=slogin
Way too risky.
Dear Mag,
The oil isn't Exxon's.
It's mine.
And, it will stay mine, as long as the leaseholds are not let.
Once they are let, the oil may become Exxon's or Dubai's.
If you want to make MY oil exxon's, then grant the leases.
But, like he said, that will do nothing for US supply of oil, and nothing for the price of gas.
The answer is obvious - nationalize the oil industry. If the government can run that just half as well as they ran the Midnight basketball program or the "War on Poverty", we'll all be living in a Fascist Utopia!
"Multinational" means, of course, "just that."
"Corporations" belong to "no country," thus "every country" is "a customer" and the-laws-of "any country" (whatever it is...) "Do Not Apply."
"There is a reason," and by-the-way it is a VERY GOOD "reason," why this notion of "nations" and "sovereignty" exists in This World...
... "As You Can See," if this notion DOES NOT exist, human avarice goes Unchecked.
GREAT JOB CENK! I hope HuffPo puts this up front and center and keeps it there. Also the comment below about Naomi Klein on Democracy Now pointing out that Canadians who ARE pumping more and more are still paying more and more at the pump. Talk about that too. Again, great Cenk and keep it up! And thanks to HuffPo system that sends me an e-mail when you post.
But of course - thanks for making this point. The oil that is extracted from US soil is sold (just as any other oil) on the commodities exchange for "market price." Whomever will pay most for it will get it.
If the goal is to lower the "market price" by flooding the market with more oil, I would suggest we ask exactly how many barrels/day they expect these magical wells to produce. Last time the offshore drilling initiative went before a vote in CA, the consensus was that there was not all that much oil out there anyways (something like a 4 days-supply at current consumption patterns).
The only way that more drilling can effect prices in a positive way is if the supply on the market exceeds demand. There is no evidence that the GLOBAL demand is dropping, and only a few months' worth of evidence that the US is curbing it's appetite. So ironically - our reduction in demand coupled with increases in places like China and India will make oil more expensive here.
The ONLY answer is to replace oil with something else.
Last comment - it's literally YEARS between the time a lease is granted and any oil comes out of a well. So there is no short-term relief here anyways.
Exactly right, Cenk, and when an oil man like T. Boone Pickens tells Congress that we can't drill our way out of this problem, maybe they should listen.
Let's see...
I take the train to work every day, 100 mi round trip, 20 days a month. I pay for my train ticket, but I am not buying as much gasoline. It used to take about 4 gallons of gas, round-trip. So if 60% of a barrel of oil goes into making gasoline, I am saving (4 X 20)/0.6 = 133 gallons of oil, or little over 2 barrels.
Why can't the little guy cash in on this energy independence thing? Why not a program to reimburse me for the oil I am saving? I am keeping us from buying as much imported oil and this helps the balance of payments and value of the dollar just as if I was an oil company and discovered new oil.
And its cheaper than what Exxon will have to spend just to find new oil. Maybe Exxon will want to chip in: - I am not using the oil that they will have to drill for offshore or in the arctic, find and then wait three years to sell.
And I won't even charge them interest.
That comes through the $1000 tax rebate funded by taxing the oil. You have the choice between doing what you're doing and pocketing the money, or continuing to buy gas and reimbursing the oil companies for their tax burden.
Note that's the exact opposite effect of a "gas tax holiday" which penalizes you and rewards oil consumers and producers.
So the tax rebate was funded from taxes on oil companies? Are you sure they didn't just delay re-paying Social Security for a little while longer?
Or took it out of some social program?
I agree. A tax holiday on gasoline is useless - the stuff is priced too low.
So why not tax gasoline until we get to $8/gal at the pump like in Europe? They get a good mass transit system so you don't even need to buy a car. I'm for that - no more car payments, insurance payments, repair costs, etc.
If a lower price for gasoline via tax breaks is bad, then a higher price based on taxing gasoline is better.
We will use less - and that is what T. Boone says will reduce the "greatest transfer of wealth in history..."
Wait!
My math is a little off...
A barrel of oil is 42 gallons and you can get about 20 gallons of gasoline out of the typical crude oil.
If am saving 80 gallons of gasoline a month, it takes about 3.8 barrels of crude oil to make. So I am saving the country about $530 dollars because we don't have to buy imported oil at that price. (Which is strange because at $4.50/gal the total monthly cost for me to drive to work is only $360 to buy those 80 gallons. The difference goes to Exxon - or whoever - they are selling the rest of the barrel for lubricating oil, plastics, diesel, etc.)
So there is really no incentive for the oil companies to reduce the use of gasoline in this country (duh!) and yet they get to drill on public lands to find oil they can sell for high prices and profits.
Just like a drug pusher.
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