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.

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Comments

[davidrusso]

So would you be ok with the Saudis, Russian and Nigerians deciding to keep all their oil for themselves as well?

[dutt]

The author isn't suggesting we'd keep our domestic oil to ourselves; he's dispelling that myth. Many people have this false notion that we will become energy independent and enjoy cheap gas by tapping into ANWR and offshore oil. If tapping into ANWR and other areas currently off limits to drilling only means a slight and temporary drop in world prices maybe its not worth the environmental consequences as well as the threat to various industries such as tourism and fishing.

[joebhed]

I could be wrong but I believe all of those countries, and Venezuela, among others, have nationalized their oil, with the point being that the benefit of owning the resource goes to wherever the COUNTRY wants it to go, rather than the corporations.
It's a small matter, I know.

[Rog49Thomas]

Surprised?

This is a Republican proposal.

You thought some how the oil was for us citizens instead of corporations?

Or did you think there was a drafting mistake in the bill?

[envirossf]

Finally!! I've been waiting for SOMEONE to mention this. Every time a television talking head mentions how McCain's got the edge on energy issues (and mentions polling showing Americans in favor of more offshore drilling) they neglect to state that the leases are issued to energy companies. Voters have been CONNED by politicians and energy companies to believe that if we drill more in America, Americans will get the oil(or resulting gas). We do not live in Venezuela or Saudi Arabia where energy is nationalized, and prices are kept artificially low by the government.
The CON goes even deeper than that, making people think that the interests of huge multinational energy companies ability to go anywhere to produce energy for themselves is in America's best interest. This results in what should have produced the true "MISSION ACCOMPLISHED" banner for the war in Iraq. After 30 years, the energy in Iraq has been DE-NATIONALIZED, Dick Cheney's true reason for war has been certified.

[vippy]

Invaluable contribution! Thank you.

[toosinbeymen]

Bravo, Cenk. This is a huge OF COURSE!

It's shocking that Americans' speech and thinking is warped into "us against them" as in football teams. We've duped ourselves into thinking what's good for US oil companies is good for us and adds to our general wealth, as if there was such a thing.

[FatJoe]

Naomi Klein also made a really good point about this recently on a recent edition of Democracy Now: Canada has turned into an even greater oil power with the increased oil prices. The Alberta tar sands have become hyper-profitable sources of petroleum and produce more oil for the US than any other country and produce a lot of oil for Canada as well. Has that helped Canadians who feel the pain at the pump?

No, absolutely not. Canada has drilled more petroleum, yet prices have consistently gone up for Canadians.

I know the last thing we want to do as Americans is to learn from other countries' experiences, but it's worth noting that the corporate oil propaganda claiming that "more drilling=lower prices" is complete horse caca. And the Canadian case has ALREADY disproved their claim.

[Shortyfuse]

At last . My approval of you has gone up 100 percent.
No the oil is not being sold here because the American dollar is so weak and the world market is such a better deal.
So please, please support the Democrats in their ' use it or lose it 'bills. Call your Republican and Blue dog Democrat (spit) senators and congressmen and DEMAND that they support the Democrats in the 'use it or lose it ' bills (meaning the oil leases the oil companies already have but do not use in order to artifically inflate oil prices) Call all Senators and Congressmen and DEMAND that all oil drilled in U.S. stay in U.S.
CALL TODAY, CALL NOW
Threaten to charge them with treason for the violent overthrow of the government , if they don't. Ha Ha Oh heck go for it. I know you are AS MAD AS HELL AND YOU ARE NOT GOING TO TAKE IT ANY MORE.

Add it to a law that demands that all states have at least 60 percent of their electiricty come for renewable sources. ( not nuclear)

[joebhed]

Abso-freakin-lutely !

[TxAggie]

Shorty- I work for one of those oil companies with "unused leases" which we paid top dollar for, shot sesimic over, processed the data, reprocessed the data- interpreted the data and then determined that the probability of finding commercial hydrocarbons was insufficient to justify spending millions of dollars to drill a well. On the leases that we determined might have hydrocarbons we have drilled wells and 25% of the time we have a commercial discovery, then we spend millions to drill additional wellls, fabricate and install a platform and pipeline to produce the wells. So I would estimate that 25% of the leases we buy end up with a drillable prospect and when we drill 25% of those are successful so for each 100 leases we buy (that is approx 500K acres) we drill 25 and 6 of them produce. While doing this we spend approximately $400 MM per year searching for oil and gas drilling 1/4th of the leases we own and disproving the prospectivity of the 3/4ths with seismic- at the end of 5 years all of the leases that are not producing expire. Could you explain to me how you figure we have "unused" leases?

[PascoBill]

As an example, why didn't the Alaska pipeline get built to connect with the existing large Canadian system, and then flow into the U.S.? Instead, it goes to a sea port (Valdez). And how much of the oil shipped on supertankers from Alaska actually goes to the West coast harbors? (I don't know the real answer, but I heard years ago that Asia is a major recipient of Alaskan oil, and several western U.S. ports don't allow supertankers). Does anyone know those statistics?

[jvarga]

According to the DOE none of that oil goes to Asia.

[Paul]

I think some North Slope crude goes to Japan - and we get some from the Saudis somehow.

Oil is fungible - just like drug money.

[jvarga]

I'm just prefacing this by stating that I'm not suggesting we go drill for more oil. For whatever its worth, according to the department of energy the over the last year the US exported an average of ~600,000 barrels of crude oil per month, 100% of it going to Canada (where I think it's refined and sold back to us). We ship gas and other refined products all over the place, but the crude oil itself appears to stay here.

The footnotes on the table are "Crude oil exports are restricted to: (1) crude oil derived from fields under the State waters of Alaska's Cook Inlet; (2) Alaskan North Slope crude oil; (3) certain domestically produced crude oil destined for Canada; (4) shipments to U.S. territories; and (5) California crude oil to Pacific Rim countries. Totals may not equal sum of components due to independent rounding."

Which suggests that new oil won't be shipped out to whoever?

tonto.eia.doe.gov/dnav/pet/pet_move_expc_a_EPC0_EEX_mbbl_m.htm

[jvarga]

I mean is the fear that exxon is going to drill more oil then say "oh we could sell it in the US for 150 dollars a barrel, but lets load it onto tankers and send it to China where we can also sell it for 150 dollars a barrel"?

[TxAggie]

Why would anyone ship crude across the ocean inif they can sell it at the closest possible sales point? The answer is they won't you are just making this stuff up.

[rvn1965]

Maybe, since it is coming from us, we can put some controls on who gets it, and how much they can re-sell to us for? That sounds like a fine idea that I would expect Liberals to love. Another Federal Program!!!

[LibraMan]

The same applies to Iraqi oil. US GI's die but big oil will sell to the highest bidder.

[rvn1965]

Well, at least you popped the balloon on the "We went to war for Oil" stand!

[LibraMan]

which had popped the previous spreading democracy bubble.

[hoopesaz]

While some people may assume that, this hasn't been the principal objection to offshore drilling. So, make that your argument. Instead of saying "no offshore drilling", argue for offshore drilling ONLY if the oil is added to and/or available for our strategic reserves. It makes sense to drill responsibly if the oil can be secured in a responsible manner.

[JohnFromCensornati]

You shouldn't have to make that point.
It should be painfully obvious.
Of course, those who call for drilling already know that.

[plebeianswillrevolt]

Damn good point Cenk. We should ask President Obama to change that.

[davefoc]

And then let's all agree that there's not some magic environmentally harmless way to get and use oil but that while the country transitions from fossil fuels to other technologies we still need to keep going and that means new oil fields need to be developed.

[davefoc]

And what part of the oil companies make money from selling oil is bad. Is paying money to the US treasury for taxes and leasing bad? Is paying their employees bad? Is producing a useful product bad? Is taking huge financial risks to develop new extraction techniques and locate new oil bad?

So making a profit is bad? OK, you think that's bad. But is it so bad that you're will to give up on the other benefits to prevent Exxon from making a profit?

One of the reasons that Exxon makes so much money is that the oil companies get sweet heart tax deals from the government. At a time of massive deficits sweet heart tax deals for oil companies is a national disgrace. Let's fix that.

And while we're at it let's take a good look at how much money the government is paid for oil leases. My bet is that no other country in the world gets less money for the oil removed from its ground than the US. Let's fix that. I see no reason why the average citizen shouldn't be getting his fair cut of the money that is being made by selling his oil.

And one of the reasons why the price of oil has spiked is that the US congress voted to put in place tax subsidies for large trucks and SUV's. This was one of the most cynically corrupt pieces of legislation ever passed by the US congress. Let's eliminate that.

[rvn1965]

But....but....what about the Caribou.....the Spotted Owl (has anyone ever seen one?) ........Great comment!

[Cathexis]

No one said it was bad ... we said "Don't lie to us by telling us it will solve the energy crisis in the US."

[TxAggie]

The gov't receives $16 B annually in royalties and a whole bunch of money in fees. When you consider the taxes US companies pay the govt take approaches 50 percent. If they royalties go up (they are 18.75% on new leases now) it becomes less and less attractive and exploration money will go to the international arena where the reserve sizes are larger (rememember access is limited in the US?). The advantage to the country in addition to the royalty is the job creation, broadening of the tax base, lessening of trade deficit, etc. The gov't risks nothing and they have developed none of the expertise or technology that finds the reserves. It is a fair system except that we are allowed to explore in only 15% of the OCS, we are running out of impactive targets to drill. I work for a small company that drills in less than 300 feet of water, where we play is really picked over. For the last 20 years we have been telling the politicians that we were painting ourselves into a corner by importing more and developing less domestic reserves and needing more access, now the chickens have come home to roost and we (industry) are the bad guys?