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Drilling offshore and in ANWR will NOT lower gas prices

Bush came out today and said that congress should lift the ban on offshore drilling. McCain gave a speech on the environment last night saying the same thing.. This is nothing more than a political ploy similar to the ridiculous gas tax holiday proposal. Let’s take a closer look:

  • We don’t have a supply problem. Demand is high, but oil supply is still meeting demand. Have you seen any long lines at the pump lately? I didn’t think so.
  • We DO have a speculation problem. Oil is so expensive because middle men are buying up oil futures and causing the price to skyrocket.
  • It will take AT LEAST 5 years, maybe more to develop ANWR and/or offshore rigs to the point that they start pumping oil into the market, and that’s if the oil companies got right to work. It’s very likely that the oil companies that purchased these leases would sit on them until the market was much worse just for the sake of profit.
  • Even if they could start pumping oil out of these areas today, we would only be supplementing a small percentage of the US oil consumption. The price of oil would still be determined by the global market and the speculators. But the oil companies would be making even MORE money because they don’t have to go through the middle east to get their oil before they sell it to us for the same price.

It pisses me off when Republicans tout these ideas as “solutions”. It anger’s me even more when I think about how many Americans will be duped by this suggestion. We’re in this mess with oil because we didn’t regulate the oil companies like we should have. We’re in this mess because we spent the last eight years pumping money into Iraq instead of into researching alternative energy.

We need to face the fact that there is no quick solution to the skyrocketing price of gas. The only way we’re going to get cheap gas is to make it irrelevant by offering hydrogen, electric, and biofuel alternatives. Drilling offshore and in ANWR is just another gift to the oil companies and that’s the last thing we need.

2 Responses to “Drilling offshore and in ANWR will NOT lower gas prices”

  1. on 26 Jun 2008 at 1:47 pm Damien

    Don’t forget that oil companies LOVE to buy up alternative energy patents and then sit on them while the sellers are required to keep their inventions hush-hush due to confidentiality clauses in the seller agreements.

    When will we see real alternatives to petroleum? In about 100 years when the oil fields fail to produce and OPEC and the others need to keep their golden palaces going. Then they’ll open up their coffers and charge astronomical amounts for technology they’ve been sitting on for years. Watch “Tucker, a man and his dream” or “Who killed the electric car?” to see how carefully the oil clans protect their interests.

  2. on 25 Dec 2009 at 12:27 am Paul

    Mike, good to see you’re out and about. Merry christmas! I still appreciate the q-basic lessons of yesteryear.

    A few notes on your post:
    1. “We DO have a speculation problem. Oil is so expensive because middle men are buying up oil futures and causing the price to skyrocket.”

    Oil futures (or any futures) are ways of spreading risk through a market so the individual producer can focus on producing and not on timing his production with the market ups and downs. If middlemen are buying up futures at high prices, then they anticipate the prices at that time to be even higher. Why would they anticipate this? I submit it’s because they see that there is potential for massive increase in consumption of available supply (e.g. China becoming industrialized and growing its oil consumption rates rapidly, the Arab states’ oil reserves assessment methods being faulty, etc) and they want to hedge against it. I don’t see a grand conspiracy to raise prices in the act of futures trading. Oil futures can cause folks to lose money when oil becomes less expensive when they thought it would be more expensive, and they’re forced to sell it for less than they bought it for; otherwise, they get a bargain when prices go up, which actually results in cheaper gas at the pump than you’d otherwise have.

    2. “It will take AT LEAST 5 years, maybe more to develop ANWR and/or offshore rigs to the point that they start pumping oil into the market, and that’s if the oil companies got right to work. It’s very likely that the oil companies that purchased these leases would sit on them until the market was much worse just for the sake of profit”

    The profit motive is what drives our free-market economy. Arguing against it is hard in the face of the various recent (20th century) misadventures of central planning, socialism, and fascism. There’s enough competition in the oil business to prevent monopoly, which means that the companies would constantly be competing to deliver the cheapest, best product to the marketplace. Thus, whether they sit on the leases or not, their actions would be geared towards getting an edge on their competitors–which means that Exxon would be trying to deliver more gas, and cheaper, than the Conoco down the road. I don’t see the relevance of the terms of the lease to the issue at hand. Keep also in mind that developing oil sites takes years to begin with, so waiting until market conditions were Just Right– like summer ’08– to to begin development would be an unwise move.

    3. I agree that the gas tax holiday was silly.

    4. “Even if they could start pumping oil out of these areas today, we would only be supplementing a small percentage of the US oil consumption. The price of oil would still be determined by the global market and the speculators. But the oil companies would be making even MORE money because they don’t have to go through the middle east to get their oil before they sell it to us for the same price.”

    Depends on whose estimates of the reserves you look at. And again, if the oil companies get it cheap, they’ll undermine the OPEC/Venezuela/nigerian pricing table and I think we’d get cheaper gas. The profit motive is a wonderful thing, and I think Chevron would jump at the chance to gain some market share. Another whole topic is refinement capacity, because we haven’t built a new refinery in the US since.. when, the 70s? 80s? That’s a bottleneck that can result in increased price– increase refinement capacity, and increase the availability of gas on the market, and lower prices.

    Anyway, some thoughts. Hope you’re well, and it looks like you’re making productive use of your time-

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