THE BLOG

It Is Not Offshore Drilling, Stupid!

09/06/2008 05:12 am ET | Updated May 25, 2011

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!