It Is Not Offshore Drilling, Stupid!

The price of oil has gone through the roof. The gasoline price has skyrocketed, reaching as high as nearly $5/gallon, before receding to its current price of just above $4/gallon. But, that is not the end of this gloomy picture. The price of natural gas has also gone up greatly, resulting in much higher costs of the electricity and heating. The airlines are suffering from the high cost of fuel, with some of them filing for bankruptcy, and others charging us for everything, from a glass of water, to a pillow.

These are just the direct effect of the high oil price, but the indirect effects are just as devastating. The price of food stuff has increased dramatically, partly because of the energy cost, and partly due to the zeal for producing the so-called biofuels from corn, soybean, and other agricultural products. The tourism industry is suffering, because it has become too expensive to take a vacation, which means that hotels, motels, resorts, and restaurants are not doing well. Even the company that collects my home's trash every week got into action, informing me this week that, due to the high cost of fuel, it will impose a $6/month surcharge.

What have our leaders done or suggested to remedy this terrible situation? In his typical cynical way, President Bush has lifted the ban on offshore drilling. John McCain, in addition to forcefully supporting offshore drilling, made another cynical proposition: giving the people a "holiday gasoline tax break," not charging them the tax that they pay to the federal government.

Speaking in Houston recently, McCain even declared that, "for reasons that become less convincing with every rise in the price of foreign oil, the federal government discourages offshore production," as if it is only the price of foreign oil that has been increasing. He also claimed that the president's lifting of the ban on offshore oil drilling is responsible for as much as $10/barrel in the recent decrease in oil price, even though the credit-hungry White House itself does not take such credit for the decline in the oil price.

It is, of course, sensible to produce more energy domestically to reduce our dependence on foreign oil. But, offshore drilling is not the solution, and not just due to its adverse effect on the environment. Consider, for example, Alaska's Arctic National Wildlife Refuge. Its known oil reserves are about 17 billions barrels. That is a little over two years of our total oil consumption in the United States. Looking at it another way, since we currently import about 65% of the oil that we use, the ANWR oil is equivalent to roughly 3 years of our oil imports. This is the best case scenario, because it assumes that we can get every drop of that oil out of the ground, which we can never do; actual recovery factors are much lower.

But, there is even a bigger catch. Even if we start today to drill for oil in Alaska's ANWR, it will take at least 7-10 years for the new oil wells to start producing and coming online. Compare this with what McCain said a while ago, "within a matter of months [of ending the federal ban on offshore drilling], they [the oil companies] could be getting additional oil." Moreover, according to the Energy Information Administration of the Department of Energy, peak oil production will not be before 2025. Even then, the additional oil production would reduce our oil imports by at most 4 percent. By then, however, if no new significant oil reservoirs have not been not discovered elsewhere, the oil production of the rest of the world will be lower, while its price will be higher.

What McCain is also not telling people is that, oil is an international commodity. This means that its price is set at the international level. The more oil a country has, the more influence it has in setting its price. The U.S. owns only 3% of world's total known oil reserves and, therefore, it is not a player, in a positive way, in setting the oil price. So, while we do not have to sell the oil from the offshore reserves in the foreign markets, its price will still be determined at the international level. Thus, if, for example, the oil production by Russia and the OPEC countries declines over the next two decades, as it is widely believed, the price of oil will still be high, no matter how much additional production we will have here at home. In fact, the U.S. plays a very negative role in setting the oil price, because with only 4% of the world's population, it consumes 25% of the total production.

There are also political factors that contribute to the high price of oil that are the result of the reckless foreign policy of this Republican Administration. Recall that we were told before the invasion of Iraq that, after Saddam Hussein is overthrown, the oil price will tumble from $35/barrel (its price in 2003) to historic lows, because Iraq would leave the OPEC and drown the world in cheap oil. But, that did not happen. In fact, many experts believe that we pay up to $40/barrel as a "fear premium" - the price for the market's fear that the instability in the Middle East, and in particular attacking Iran, will disrupt oil production.

But, there is also a bright side to the high price of oil. As bad as its influence has been on our economy and "pocket issues," the high price of oil has acted as a peace maker. To see this, just recall that we were told for a long time that if Iran is attacked by Israel and/or the U.S., the oil price will jump to $150/barrel. But, the oil price is already close to that level without any attack. In fact, we actually got there when the oil price was as high as $147 just a few weeks ago. As I discussed in my last article on this site, military attacks on Iran will raise the oil price to $500/barrel. This surely has played a sobering role in preventing the neoconservative warmongers from starting another catastrophic and unjustified war in the Middle East.

But, John McCain's "depth" of knowledge about energy issues is not manifested only by his misleading but forceful advocacy of offshore drilling. Yesterday, while advocating construction of new nuclear reactors, he said that, "if we want to enable the technologies of tomorrow like plug-in electric cars, we need electricity to plug into," implying that the electricity that can be generated by nuclear reactors can be used in electric cars. Unless McCain has a secret and novel idea for how to use the nuclear reactor-generated electricity in a car -- such as a mininuclear reactor to be installed in every car -- I just do not see how this is possible, and I have been doing research in the energy field for nearly three decades. Electric cars become efficient if we can make physical batteries -- the so-called supercapacitors -- that can store a large amount of electric energy. But, the source of the electric energy does not have to be a nuclear reactor.

We must use the high price of oil not just as a peace maker, but also as an incentive to,

make our use of energy much more efficient;

diversify our energy resources, and develop solar, wind, and hydroelectric power;

invest in research on making fuel from hydrogen (with the funds for it coming from a windfall tax on the huge profits that oil companies are making);

develop clean ways of burning coal (to avoid polluting the environment), which can supply our energy needs for 200 years, and

yes, build more nuclear reactors to generate electricity, if we can address the problem of what to do with the spent nuclear fuel.

A good starting point for addressing the problem of spent nuclear fuels would be revoking President Carter's ban on reprocessing of the fuel, and do what France and other European countries do. Reprocessing the spent fuel will not only produce more nuclear fuel for the reactors, but also will reduce drastically the nuclear wastes that must be buried somewhere.

So, next time when a politician tells you that offshore drilling for more oil will relieve the pressure on your pocket, respond by just saying, the solution is not offshore drilling, stupid -- or say the same but in a more politically-correct way!

Comments

[bobbym]

I was with you up to:

"if we want to enable the technologies of tomorrow like plug-in electric cars, we need electricity to plug into," implying that the electricity that can be generated by nuclear reactors can be used in electric cars. Unless McCain has a secret and novel idea for how to use the nuclear reactor-generated electricity in a car -- such as a mininuclear reactor to be installed in every car -- I just do not see how this is possible, and I have been doing research in the energy field for nearly three decades. Electric cars become efficient if we can make physical batteries -- the so-called supercapacitors -- that can store a large amount of electric energy. But, the source of the electric energy does not have to be a nuclear reactor.

I'm an Obama supporter and not necessarily a nuclear proponent, but I don't understand your misunderstanding. Electricity generated by nuclear power plants is indistinguishable from electricity from any other source. You just use a cord and plug it in. And if you replace all the petroleum powered vehicles with electrical vehicles, that a LOT MORE electricity that's going to have to be produced. Storage is what it is and has to do with convienience and amount for the vehicle. It still has to be generated somehow.

It kind of hurts the credibilty of the rest of the article.

[hchriste]

Recycling the rods for a nuke plant is a good idea been used by Europe for a long time. some of the recoverable stuff can be used in research and the mdical field, the rods reused and a very small amount can be stored. There are many ways to quickly lower the price of oil: drive the speed limit, cut the lights at night in buildings and streets in cities, use wind up clocks instead of electric alarm clocks, turn off appliances not being used ( unplug not just switched), cut unnessary military flights, quit using plastic bags, quit using disposable diapers, cut disposable plastic usage and so on. Others could add to this list. Besides, who will pay for off shore drilling? the oil companies say they will not be drilling because the expense is too great and they would have a need for specialized engineers, equipment, ships and they would want the American taxpayer to foot the bill. sounds like a deal.

[FunkyP]

they would want the American taxpayer to foot the bill. sounds like a deal.

The American taxpayer also must foot the bill for nuclear power, because no insurance company will insure them, and no investors want to back them,,,so they must be publicly funded AND publicly insured. Nuclear is expensive, and dangerous, and France is having some leakage problems with their plants.
Nuclear waste is FOREVER.

[FunkyP]

Here's a quick easy way to immediately lower gas prices, and assure that we will have plenty of oil in the future to make plastic trash bags.
Mercedes Benz has announced they will no longer make cars running on fossil fuel, and their goal is to be able to do so by 2015.
If EVERY car company made a similar pledge how much would the price drop? The majority of the oil we import goes to propel our vehicles.
We don't have to do that anymore. All it takes is the courage to commit to eliminating fossil fuel engines for cars by 2015 and the oil companies and speculators are DONE.
What are the chances that Gm, maker of the Hummer, will follow the lead of Mercedes Benz and swear off the oil addiction?
http://www.treehugger.com/files/2008/06/mercedes-eliminate-petroleum-7-years-2015.php

[mjt218]

That article shouldn't be confused with fact. Sure, Mercedes wants to have an electric car by 2010, but I don't think the company has ever said that they will stop production of fossil fuel vehicles at any point in the near future.

I'd love to see a press release from Mercedes that would make this statement. Whatever bias you think the media has, if this was a real story, it would get a lot of play time.

[FunkyP]

You could have confirmed this by clicking on the provided link. They have set the goal for 2015 and are proceeding based upon that. Mercedes does not 'want to have an electric car by 2010'; they are introducing their electric car in 2010.
"Earlier this year, rumors of an all-electric luxury car from Mercedes-Benz hit our radar and now Daimler CEO Dieter Zetsche has reportedly confirmed that his company is trying to release a high-class EV in 2010."
http://www.autobloggreen.com/2008/06/20/mercedes-luxury-electric-vehicle-now-more-than-a-rumor/

I have found several articles which state that Mercedes will stop making gas-powered engines, but, no, I have not seen the statement from MB officially.

I don't know about media bias being a factor but a recent Huffpo article was titled 17 electric cars you should know about...is the media reporting on any of these?
One of them is scheduled to be in the $30-35 thousand range:
it generated quite a bit of excitement because of its relatively low price tag for a highway-capable electric car: $30,000. We then got more information about the XS500 and confirmation that the target price was now "$30,000 to $35,000" for the 2009 XS500 in the US. The XS500 should have an all-electric range of about 120 miles.
http://www.huffingtonpost.com/2008/07/14/electric-cars-take-over-1_n_112771.html

[UnbiasView]

Questions on Dem talking points I still have questions on:

#1 - Sure, the oil companies have 68 million acres but are they in a stage of devlopment? Getting a lease is just step one, it can take years to get a permit to actually drill and another permit to extract the contents. I also haven't seen them back up there claim with saying how much oil is actually on that land, just because they have a lease doesn't mean that there is a significant amount of oil there or that it isn't in process either legal or operational.

#2 - The other argument is it will take 10 years to get . . . so what? We will need in oil in 10, 20 and even 30 years. Hopefully not as much but there is little doubt it will be needed. Bill Clinton said it 13 years ago and looking back, sure would be nice if he wouldn't have made that weak excuse because ANWR would have been up and running.

#3 - The last argument, it won't lower prices . . . so if you blame the speculators you basically contradict yourself since they are setting the price in the FUTURES market on what they think the price will be in the FUTURE. If they think supply will be tight and we won't add to the supply, the price will go up.

If drilling wouldn't help the price, your logic would say that we could stop domestic drilling

[FunkyP]

Since we're dredging up the past, Gm put out a fleet of electric cars around 1980, with two year leases. At the end of the lease period, they took them back from the reluctant leasers and destroyed them.
Around that same time, Reagan was ordering the removal of the solar panels President Carter had put on the White House roof.
According to Government calculations, drilling in the forbidden areas will result in a 2 cent reduction on a gallon of gas, in 6-10 years, if they find the gas and can recover it.
Or we can follow the Mercedes lead and just stop making gas burners.
OR, we can ignore reality, and drill everywhere and use it all up that much faster. Then, when the oil is $100/gallon, we'll reconsider that electric car nonsense.
Driver, bring round my Hummer. I'm driving to Vegas!

[Amalek]

You could shut down every oil well in America and the price of oil would go up 3%. That is what he is correctly saying.

[mjt218]

I don't think that's completely true. While, we only have 4% of the world's reserves, we still produce 20-40% of the oil we use domestically. Since US production is much more stable than international production (Middle East unrest, African, unrest, Latin American nationalization, etc.) it has a much bigger impact on world prices than in proportion to our reserves (which don't have anything to do with production by the way).

[BCubedReg]

And conversely, you could dig up all the oil reserves the U.S. has and the price would only go down by 3%.

[TxAggie]

So your solution is to not drill either ANWAR or Offshore. So we continue to import and our economy continues to do to hell while we enjoy the "peacemaking effect" high price of oil and its negative impact on our standard of living. You cite the "adverse effect on the environment" of offshore drilling then you talk about what little effect ANWAR production would have on the market- how are thoses two related? What is the adverse impact of offshore drilling? Well it is very little but since you are not versed on the subject you can only make broad unsupported statments.

Your article is just whiney Dem talking points but you were able to work them all into onepoorly written article.

[LCRover001]

The A#1 cause of this economy is a direct result of every single bumble headed decision by GWB and his crooked administration. What started it all wasn't terrorist, wasn't 9/11, wasn't the housing bust, and it isn't fuel prices.

What started the tumble was free trade with China and India, more to the point out sourcing jobs over seas. When this was passed and as the right wing talking heads trumpeted how great it was for the economy, whose economy can be seen from Bush's tax cuts. More jobs were lost and the system quickly broke down.

The reason why the housing market went bust was due to shady loans, in part. The main reason people could not make those payments was because their jobs went to China or India. You can't make the payment if you don"t have a job and when everyone else is looking too it makes it very hard to find one. Instead of coming up with a system to correct this banks thought twofer, we get the homes resale them and we still have what the first chumps paid. Thing is no one was buying because those who still had jobs were afraid they might not tomorrow.

As the GOP tried to cover their posteriors by lowering the interest rate this caused the dollars value to drop, the dollar is worth half what it was when GWB took office. Oil isn"t selling higher it has just adjusted to the depreciated value of the dollar.

[UnbiasView]

"it will take at least 7-10 years for the new oil wells to start producing and coming online"

How long would a big wind or solar push take to come online?

This is the weakest argument liberals make. Should we not save for our kid's college or retirement since we won't be seeing the benefits for years?

[Paul]

The US consumes something like 20% of daily crude oil production. About half of that goes into gasoline. We therefore have a bigger lever on price by lowering our demand, not by increasing production from expensive offshore and arctic sources.

Congress has not automobile mandated fuel milage and probably never will.

The only way we have reduced consumption is through high prices.

The best way to keep oil prices consistantly high and destroy demand is to tax imported oil and put the proceeds into mass transit.

[UnbiasView]

"Congress has not automobile mandated fuel milage"

What good would that do? It would take at least 7-10 years to enact it because you need to give the automakers notice.

(kind of funny that's the same excuse Dems use about drilling, doesn't make too much sense does it)

[Paul]

I must be getting dyslexic in my old age.

Congress has ducked the energy issue at every turn otherwise why would a Hummer even exist?

Nope, market forces are better. And if Ford and GM go bankrupt for their stupid marketing decisions, so much the better.

Someday Americans are going to wake up to the idea that they don't need to spend $10K a year just to get to work and the supermarket. Mass transit is far more efficient than the automobile in terms of individual investment and the cost of energy.

[Samson1]

You may well be 100% correct and it doesn't matter if McCain can convince enough people that the US needs to drill and now and that Obama is opposed to it. Apparently, McCain is not having any problem achieving this, therefore, STUPID, perception becomes reality (at least for this election cycle) unless Obama can connect with the people who believe this. I doubt that he can because he talks over there heads and in an educated and literate style that is foreign to how most of the people communicate. He needs to be able to speak with people as "just folks" much like Bill Clinton during his terms and Reagan during his. What they said was less important than the way they said it.

Being right can get you a lost election if the other guy is more believable. Remember, what McCain is saying is what all those people who bought SUVs and Trucks WANT to hear. Makes it much easier to believe we can solve our problem so easily, doesn't it. How about spending time figuring out how to talk to people so they will get it, you can forget about convincing them with facts.

[PioneerKing]

Even if the US allowed the oil companies to drill everywhere they wanted to it would not change the price of oil because the US is not going to nationalize oil. Any oil the oil companies recover will end up on the world market and will not have to be sold to the US.
The price of oil will always be that of what the international market sets regardless of where that oil is sourced.
Oil companies are not drilling on all of the land that they currently have leases for because they know that it is in their interest to keep that oil in the ground for as long as possible until the middle-east and African oilfields are no longer profitable. By continuing to use their clout to thwart alternative resources, oil companies are using their influence in driving our energy policies and, are using their power to gain the lease rights to drill wherever they want to in the US now while they can control the agenda.

[Merg]

Thank you for hitting that nail on the head. I wish the Obama campaign could point out to the voters that just because the oil is pumped out of the US doesn't mean it will stay in the US. As things stand now, the US is stll exporting petroleum products (refined oil) out of the US as I write. Just ask the US commerce dept.

[mostlybluedot]

I don't think you get it. It really does not matter at all how much oil there is out there or if it takes a hundred years to get it. The people want it as a symbol if nothing else. Better go after it or watch your support dwindle a little more each day. It is not an energy policy to "compromise" on off shore drilling or being Robin Hood in taxing the oil companies. It is foolhardy and the repigs will prove it to you soon enough. I think the polls already are showing the loss of support for OB.

[DallasMike]

mostlybluedot,
You are right on
Even if drilling does not drop the price of oil 1 penny actions speak louder than words and that is what Americans want.

[DeeLight]

Roger Blanchard is the author of "The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region" published by McFarland & Company (2005)

http://www.energybulletin.net/node/44870
~ It typically takes 6 years or more for a deep-water field to reach production after the decision to develop; frequently it takes longer due to problems that pop up. ~
~Desperate people do desperate things. As Americans become more desperate for oil, I expect that ANWR and offshore areas will be opened for oil development. It will be like burning the furniture to keep the house warm in mid-January. It will be a desperate move that won"t result in much.~

Regarding refining capacity:
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_unc_dcu_nus_m.htm
Operable Utilization Rate (%) in May 2008: 88.8%
http://www.dallasnews.com/sharedcontent/dws/bus/stories/121107dnbusrefinery.2894c91.html
~Some U.S. refiners are shy about expanding at home, where demand for fuel grows slowly. Instead, they're building overseas, where the appetite for fuel is more ravenous. ~
~"U.S. refining capacity is very tight," said U.S. Secretary of Energy Samuel Bodman, who was on hand to turn a ceremonial shovel. [regarding a Saudi Aramco project in TX]~

Record breaking profits:
http://www.theautochannel.com/news/2008/08/03/095276.html

Refining capacity is a big bottleneck. All the increased production in the world is meaningless if we don't have the capacity to refine the product.

[UnbiasView]

And who votes against and makes it hard to increase that capacity?

Dems / environmentalists . . . so either way you are ripping your own.