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Drilling Is A Fraud |
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One after another, John McCain and George Bush have offered the same arguments as to why the U.S. should drill for oil domestically and generally expand its oil industry:
Here’s the reality: Drilling is a fraud.
Honestly, this isn’t an environmental argument. As much as I want to stop global warming, save our pristine wilderness, and generally be good to the earth, this argument has nothing to do with that. And, surprisingly enough, as much as McCain is simply flipping his position because of political expediency, I’m not going to call him on it. (Don’t believe me? Here’s McCain vs. McCain on drilling policy.)
Gas is at $4 a gallon. People have been feeling the pinch for a long time now. They want their politicians to do something about it, and John McCain and George Bush have offered offshore drilling as a cure.
The simple reality is, drilling just will never, ever do what McCain and Bush think it will.
Here’s why…
Reason #1: Offshore Drilling Won’t Increase Oil Supplies For 7-10 Years
That’s right, even if we repeal all bans on drilling anywhere in the U.S., we won’t see the benefits for almost a decade:
That’s the estimate from the American Petroleum Institute, the oil industry trade group. Major environmental groups think the increased supply would be at least that distant before arrival, and say it mostly would benefit Big Oil.
“It would take a decade to bring new leases into production, and then they would only line the coffers of the oil industry,” said Carl Pope, the Sierra Club’s executive director.
Reason #2: Offshore Drilling Only Makes Financial Sense When Oil Prices Are High
Offshore drilling is expensive:
However, analysts on all sides agree that drilling faces political, regulatory and economic hurdles. Individual states could forbid it. If exploration were allowed, permits would have to be granted, and before that environmental concerns must be addressed. Drilling also would have to make economic sense: Offshore drilling is expensive, and the more remote the site, the more costly it is.
Therefore, offshore drilling would only make economic sense if the oil tapped could be sold at a high price. Once the price of oil drops (which it is unlikely to do, but let’s think hypothetically), offshore drills lose money, they get shut down, and prices go up again. Offshore drilling will not solve our gas price problem.
Reason #3: There’s Probably Not A Lot Of Oil Out There
Bush and McCain tout drilling as a way towards energy independence. It’s not; it’s only a very short-term fix. Once we get the drilling going (remember, 7-10 years), there isn’t much oil to drill:
The Interior Department offered a wide range of estimates of how much oil might be within reach of U.S. offshore drilling in a 2006 report. It estimated that the Outer Continental Shelf could hold 115.4 billion barrels. However, it also estimated that recoverable reserves off U.S. coasts in areas now banned from production probably hold only about 19 billion barrels.
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The world consumes about 86 million barrels a day. The U.S. share of that is about 20.6 million barrels, 60 percent of them from foreign sources.
One thousand million barrels equals 1 billion, so if there are 19 billion barrels in the areas McCain would open to drilling, that’s enough to provide about 920 days, or about 2.5 years, of current U.S. consumption.
That’s right. Drill in all the places you can’t drill now and you get (gong!) a whopping 2.5 years worth of oil. And that’s assuming consumption levels stay static, which they have never done.
Reason #4: Oh, And There Are No Ships To Carry That Oil
Even if you did build the wells (7-10 years), make it economically feasable to keep them open (that means high oil prices), and tap all that oil (only 2.5 years worth), you wouldn’t be able to find a ship to drill the oil and ship it back to shore for use:
In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.
Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security. But even as oil trades at more than $135 a barrel — up from $68 a year ago — the world’s existing drill-ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.
You can even explore for new oil fields for 5 years due to lack of ships!
Reason #5: Oil Speculation Is NOT Driving Oil Prices
“But wait,” the neocons say, “Isn’t the high price of oil speculative? Won’t opening up new reserves, or even moving to open up new reserves, wring speculation out of the market and bring prices down fast?”
No, it won’t. Why? Well, a lot of people think speculation has nothing to do with the high prices. Oil prices are up because demand is up and supply is down.
And of course, if we wanted to wring out what little speculation is present in the market, wouldn’t a big investment in real solutions like alternative, non-oil based energy do the same thing?
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This. Is. A. Fraud.
There is no way offshore drilling in the United States will lower gas prices. Ever! If anything, it will prolong our addiction to oil and make the eventual break from it worse.
Now, I understand why Bush and McCain might seize on this ridiculous policy to push on the American people. Gas prices are indeed high, and it is affecting the price of everything. America is hurting, and people want relief immediately. They turn to politicians for answers, and politically expedient politicians like Bush and McCain give them a flashy but ineffective solution.
Honestly, there’s probably only one solution for high oil prices: Use less oil. Curb demand and not only will prices fall, but you’ll spend less of your hard earned money on gas. But that’s not the kind of message some voters want to hear.
There is a ray of hope, however. It seems most Americans, when presented with the choice between expanded drilling and conservation, pick the answer that will actually give them relief:
Honestly, the messaging is pretty simple. For one, nobody like Big Oil, and McCain - like Bush - is in their pocket. If we can push that argument, plus the choice between conservation and expanded drilling, America is behind us.
Conservation is the only quick fix. The rest is fraud.
Update [Josh]: The Sierra Club has a petition telling Congress not to fall for this “Washington gimmick”. Sign it.
THANK YOU! Every time they put this idea out there - I wonder how really stupid they think we are. We need new technologies, we need conservation of resources… if we really want to do anything for industries we need to give huge incentives to inventors and create new safe ways to heat our homes and run our vehicles.
Everyone is focusing on the needs of the family… there is one component that no one seems to be talking about and that is schools and buses. I live in a district that buses students county wide. Schools already have trouble with finding the funds to provide good educations. Many schools are already running in the red… how will they manage. They play a major role in supporting working families and providing our nation with the next generation of informed inventors, doctors, nurses, etc. etc. This problem with the need for energy reaches into all aspects of our nation’s economic health. The roads and bridges need work. What about a return to 55 MPH? Does our need for speed equal the cost of the gas?
It seem like Bush and John Sidney McCain III are both loath to mention higher mileage requirements for our vehicles. It’s easier, cheaper, faster, smarter but noooooooooo, they just want to drill more. Dolts!
Jason,
Good post and I’d like to add a couple of things. Being in the shipping industry, with regard to Reason #4 you’re correct that there aren’t enough drillships in the market to start drilling offshore. However, drillships are just that…drill ships. They do not carry oil to onshore facilities. But any oil from offshore will need to be carried on U.S.-flag oil tankers if they are going to a U.S. port (per the Jones Act) so the question is, are there enough U.S.-flag oil tankers available and there might not be.
With regard to Reason #2, I would submit that it isn’t in the best interest of the oil majors to develop further oil fields because once those supplies enter the market there would be downward pressure on the price of oil potentially driving it down to where it is no longer cost effective to develop more sites. This is one of the major reasons, I believe, that the oil companies haven’t developed the leases they currently hold.
And lastly, I do believe that speculators have played a significant role in the high price of oil simply because it doesn’t pass the “does this make sense” test. We hear all the time that the high price is due to high demand but when you look at the increased demand from China and India, the media’s favorite culprits, sure their demand has increased but not in the way oil prices have increased which seems almost exponential. And this is especially so when you consider the major price increases in oil in just one years time. It just doesn’t make sense given the true market conditions.
Great points. My only comment is re: speculation.
Would opening up offshore drilling really reduce speculation? Maybe it would, a bit, but it’s hard to imagine Wall Street will really be taken in by this short term solution. What if we dedicated billions to new, renewable energy sources? Wouldn’t that drive down oil speculation a lot quicker and more permanently?
High gas prices right now are not the result of speculation. James Surowiecki goes into detail on this: http://www.newyorker.com/talk/financial/2008/07/07/080707ta_talk_surow iecki
McCain (aka clone of George Bush) is another bloodsucking thief preying on Americans and waving an American flag all the while being loyal to Saudi Arabian oil and war profiteers. Everyone with one half of their brain working should vote for Obama.
Jason - thank you for cutting thru the BS. Here’s some more: listening to the news on my way to work this morning, I heard an oil industry exec claim that there was a 20 year supply of oil waiting to be tapped off of California’s coast. No critical analysis of these numbers was voiced by the interviewing reporter, nor was any possibility of the interviewee’s bias suggested. I tried to find an online link to this story, but with no success. (I believe I was listening to NPR Morning Edition on KPCC, and it may have been a locally-produced segment, or it may have been AM stations KNX or KFWB.)
I’m still trying to figure out how increasing supply doesn’t affect prices.
Reason #1: Offshore Drilling Won’t Increase Oil Supplies For 7-10 Years
Then shouldn’t we get started now? This isn’t a short-term situation, and it requires long-term strategic planning. The same argument was made when Clinton locked up ANWR…13 years ago. Do we think that the energy supply/demand situation will be improved in 7-10 years?
Reason #2: Offshore Drilling Only Makes Financial Sense When Oil Prices Are High
Yeah, prices are high, and without adequately addressing the supply side of the issue, prices will stay high and likely continue to climb. Tar Sands made no economic sense 10 years ago, and now they’re getting a second look.
Reason #3: There’s Probably Not A Lot Of Oil Out There
I’ve seen wildly varying estimates. If there’s not a lot of oil out there, and Offshore drilling is expensive, then why would oil companies be salivating over the opportunity to flush a bunch of drilling expenses down the drain?
Reason #4: Oh, And There Are No Ships To Carry That Oil
If drilling ships are booked up for 5 years, and drilling won’t produce for 7-10 years, where’s the issue? How long does it take to build one of these ships? 15 years?
Reason #5: Oil Speculation Is NOT Driving Oil Prices
Speculators is just a sinister alias for markets. Right now, demand continues to rise not just in the US, but China, India…the whole developing world is increasingly thirsty for oil. The markets believe that this supply/demand issue isn’t getting better.
Why would drilling more oil have no affect on gas prices, but opening up the Strategic Oil Reserves (as Speaker Pelosi is urging) have an effect? Why encourage the Saudis to increase output if increasing supply won’t matter? (Besides, we’ll just have to borrow more from the Chinese and others to buy the oil to replace what we release into the market).
Whether we like it or not, new offshore drilling, and ANWR drilling, will happen. It’s only a matter of time. When gas prices hit certain pain points, public support for protecting these areas will whither and voters will demand drilling in these areas. Whether that price pain point is $8 or $80 per gallon…whether it’s this year or in 20 years, we will reach that point.
I am absolutely for public and private investment/collaboration into R&D around alternative energy sources. I’m happy to see T. Boone Pickens’ plan is getting a lot of attention (wind farms, diverting natural gas from power plants and into transportation, etc.). The fact is, oil as an energy source will run out at some point, and we’ll need new sources of energy…preferably of the clean variety.
There really is no silver bullet to our energy issues. Solutions will need to be comprehensive and include increasing oil/natural gas supplies, increasing the use of alternatives, increasing R&D, and addressing demand.
However, only addressing the demand side of the equation and telling people to suck it up isn’t going to do anything about worldwide demand spikes. Without addressing supply, we’re telling working class folks to shoulder the greatest burden (rising prices, inflation) of our energy mismanagement.
You answered the question yourself in reason #3. Drilling in these places, like ANWR, the oil leases that are already out there, oil sands, etc… only makes sense when prices are high. If we open this stuff up, oil companies will only use them if prices are high. By definition, even with these options open, prices stay high.
Therefore, why open them up in the first place?
It’s more of a matter of keeping the increase in prices more in check. With global demand continuing to rise, new drilling isn’t likely to bring prices down to where they were a couple of years ago. But it would have a dampening affect on the rate of increase, which, again affects not just gas prices, but is already causing inflation elsewhere. The burden of which hits those at the bottom the hardest.
The “use it or lose it” argument doesn’t make sense. These lands were leased to oil companies to explore. We now want the government to dictate where and when oil companies should drill, regardless of whether they’ll produce? Just because some Members of Congress think that a lease=oil reserves doesn’t make it so.
Ok, not we’re getting somewhere.
First, as drilling won’t bring benefits for 7-10 years, we’re not going to see that price-dampening affect for at least that long. So, for the next 7-10 years, prices will continue to rise.
The use-it-or-lose-it argument, then, is a good one. These are oil leases the government has already given to oil companies. These leases aren’t being used right now because gas prices aren’t high enough for Big Oil to get the profit margins they want. As prices begin to rise, this will change. Oil companies should be forced, or at least encouraged, to use what they have first before opening up something that won’t pay off for 7-10 years.
Now we get to the real point. If we’re talking 7-10 years anyway, why not do something real about the problem? Why not increase car fuel efficiency by 50% in the same time period? Or cut US oil consumption by 50%. Those are real solutions. Drilling won’t see benefits for 7-10 years, so why aren’t we proposing our own 7-10 year solution?
Or, even better, why aren’t we doing something that’s actually going to help now? Why can’t we get all of America working from home 1 day a week by the end of next year? That will cut commuting gas costs by 20%.
Drilling is a fraud. At best, it dampens oil prices. At worst, it keeps people addicted to oil. Why are we worried about dampening oil prices 7-10 years in the future? Why aren’t we throwing that idea away as a waste of money - it doesn’t really solve the problem - and going for something that works?
I’m fine with encouraging things like more telecommuting, etc…but not if it involves the federal government mandating new consumer/employer behaviors. Cutting US oil consumption by 50% is a goal, not a solution. How would we do that w/o the government implementing onerous new societal regulations?
We’ve got the same goals…getting away from dependence on foreign oil…and eventually fossil fuels altogether. Intermediate and long-term clean alternative energy sources should be pursued with the seriousness that a national security crisis warrants. We’ll get off oil sooner or later, whether we like it or not.
I just feel that we can’t walk ourselves willingly into an oil shock to get there, but must cushion the blow as we move towards the next generation of energy sources for electricity and transportation.
I can’t help it…I keep looking up at that huge perpetual fusion reactor up there in the sky….
See, that’s the thing. The oil shock is coming whether we want it or not. There is literally nothing expanded drilling will do to stop it. Think about it, drilling won’t reap benefits for 7-10 years.
In the last 7 years, gas prices have gone from a bit over a dollar a gallon to almost $5. In another 7 years, we’ll have $10 a gallon gas, whether we drill in ANWR or not. Let’s spend that 7 years looking for a real solution, not drilling.
Basically, in 7 years we could reduce our oil consumption by half with alternative energy, or we could sanction drilling and get nowhere. If we sanction drilling, political pressure goes away for other solutions. You might think we can do both, and theoretically we can, but in the real world, dealing with real politicians, it won’t happen. It’s one or the other. And one solution is clearly a fraud.
Why does it have to one or the other? Why not work towards increasing domestic production for the intermediate/long haul while working to both reduce demand and invest in alternative energy? They’re not mutually exclusive, and the transition can less of a shock than where we’re headed.
I know many view the rising price of oil as a positive development that will reduce demand, lead to greater energy efficiency, and spur development of alternatives. It will. And by artificially cutting off new exploration/development, we speed the process.
The problem is who this will hurt the most. High energy prices and resulting inflation affect us all, but you’re asking those at the bottom working hard for every dollar to make the greatest sacrifice.
They are mutually exclusive. Do you really think Congress has the political will to work on two long term solutions at the same time. Drilling is a long term solution. So is alternative energy. Why would we pick the wrong one?
I don’t view rising gas prices as a positive thing. But drilling *will not* solve the problem of rising gas prices, at least not for 10 years. By that time, the lower and middle classes will be wiped out.
So, if you want to stop the pinch right now, like in 6 months or so, promote a four day work week. Put a solar panel on every roof in a year. Institute congestion pricing in cities so people drive less. Reward carpooling. Get more government subsidized mass transit - like busses - out there.
Drilling is not going to help us for 7-10 years. I don’t see how you can consider that an acceptable solution. And I don’t see how you can believe drilling will help the lower classes. They won’t see the benefit for a decade. You think that’s really salvation?
A cynical belief that Congress can’t implement a two-pronged energy strategy does not make mutual exclusivity a fact. A plan that calls for increasing domestic oil/natural gas production while increasing investment in alternatives makes strategic sense. Why cut us off from existing domestic oil reserves and hasten the shock?
If it will take 7-10 years for new oil endeavors to bear fruit, then shouldn’t we get started now in a responsible way. The argument that it will take a long time and therefore we shouldn’t bother is illogical.
Drilling has come a long way in the past 30-40 years when it comes to environmental responsibility. Is it a zero-risk proposition? No. But Katrina blew past hundreds of oil rigs in the Gulf of Mexico without causing any issue of significance.
A 4-day workweek and telecommuting are two different things. We need to stay competitive in the world, and adopting something akin to France’s 30-35 hour work week isn’t the answer and will compound our issues in responding to globalization. As far as telecommuting goes, I’m all for it and I do it myself. But that only works in some industries. The industry list where it doesn’t work is extensive…construction, retail, etc.
I can’t even begin to imagine what it would take to put a solar panel on every roof in one year. Forget about the lack of drilling ships, who’s gonna be able to ramp up production of solar panels to meet such a goal…even if the goal is 5 or 10 years? And who’s going to pay for that? You can’t force the people to pay for their own panels. I guess you can put it on the federal credit card and let the Chinese float us another loan so we can pass that on to our kids and grandkids.
Buses are great, other than the fact that they don’t always run where people need to go, and, let’s face it, people just don’t ride buses.
I don’t think there is any one solution, and no solution is really salvation. Our energy situation is very complex, and is going to require a comprehensive plan that involves numerous initiatives on both the supply and demand sides of the equation.
You are starting from a flawed premise. You believe drilling will lessen the oil shock. It won’t. It just won’t. It won’t help for a decade, by then, we’re toast. Plus, there is only about 2 years of oil in those areas we are considering opening for drilling. You really think that pitiful amount is going to make a big difference?
And as for the environmental aspect, you are sorely mistaken on the impacts of Katrina and Rita. Though the right wing likes to obscure the fact, those hurricanes dumped close to a million gallons of oil into the Gulf. http://thinkprogress.org/wonkroom/2008/06/19/mccain-katrina-spills/
As for other solutions, sure, telecommuting only works for some. But solar panels could be ramped up within 10 years, and the government could pay for it. The price would be more than offset by less oil spending.
A Siegel has put together a great list of thing we can do to help with our energy crisis that don’t involve drilling. He’s an expert. Take a look: http://getenergysmartnow.com/?p=641
Just one comment about oil prices and speculation. Keep in mind that oil is bought/sold in dollars. As the dollar drops in value, you need more dollars to buy the same amount of oil. Since 2002, the difference in interest rates, trade flows and economic growth between Europe, China and the USA has driven the value of the dollar very low. This creates a market where oil is generally rising in price. A market like this will attract investors and speculators looking to make money, which in turn will create more upward momentum in price. Throw in Pakistan, Iran, Nigeria, Iraq, hurricanes, government ownership of most oil reserves and you end up with $140 oil, not $60 oil.
Increased supply and decreased demand will kill the price of oil…in the long run. Bush wants to increase supply, Obama wants to decrease demand. Demand is already falling. Why not increase supply and really drive down the price?
Demand has decreased in the US, but not globally. I totally agree that the devaluation of the dollar is a major component to rising prices at the pump.
The green behind the ears is showing in this conversation.
Nancy: drilling will not affect price
Gearge: The market reacts to stated goals
Harry: 7-10 years before…..
George: I”m allowing the exploration/drilling……
MARKET PRICE DROPS $14 per barrel
Did anyone read/see/hear/feel or is everyone oblivious.