Wednesday, April 30, 2008

Quick Question for My Liberal Friends (And Everyone Else)


If you are upset about the price of oil and the effect it is having on people, and you are demanding that Something Be Done About It, like Amy Klobuchar did the other day, why should we oppose drilling for more oil in U.S. territory? Yes, that means in ANWR and in coastal waters.


Here's a good synopsis from Washington Post (and Newsweek) columnist Robert Samuelson.


And (anticipating the question) yes, it's a question that our Republican senator and noisy ANWR-drilling opponent Norm Coleman should answer as well.


Help me understand the reasons not to drill.

5 comments:

Strolling Amok said...

Supply isn't the problem. We have plenty of oil for decades without opening up new fields. The problem is production capacity. And the oil companies have no incentive to do anything about that - it's more profitable for them to just increase prices than to build new refineries, etc. Drilling in Alaska isn't going to do anything to change that.

Anonymous said...

Mark,
I am afraid I am going to have to come down on two sides of an issue here.
First of all, let me state that I am not sure why most liberals are so categorically opposed to drilling in ANWR, but I do suspect that the memory of the Exxon Valdez disaster hasn’t helped much. I am not opposed to drilling in ANWR. ANWR is where God lost his shoes, and 99.5% of Americans are never going to actually set foot there. Moreover, exploration and drilling can be done in a manner that leaves a small footprint on the local ecology, and people just have to get past this notion that ANWR is going to look and smell like Gary, IN if we start pumping oil out of the ground there. So, I am not at all opposed to drilling there, but when it finally happens (and it will) I hope to God our government doesn’t have an oilman negotiating the deal with the oil companies. We could actually get some decent concessions out of big oil, and then maybe get 90% of the state of Alaska off the dole.
Now that I’ve come out of the closet on being pro-drilling in ANWR, I have to point out that if and when we do start pumping oil out of there, it isn’t going to do much to help us with the price at the gas pump, or with making the US less dependent on external energy sources. First of all, the current price spike in oil has a lot more to do with other factors, particularly, the devaluation of the dollar and structural limitations in our current domestic refining capacity. Moreover, it will be at least 10 years before any of that oil reaches the lower 48, so there will be no relief to our current price spike. But more importantly, due to the rise of futures trading, oil has become a fungible global commodity. So the notion that stakes in an Alaskan oil field will equate to energy security doesn’t hold water. When the price of oil rises, then the market price of every barrel of oil in the world rises. So selling this as an effort to boost energy independence just doesn’t hold up. The US has such a limited supply of oil, and consumes so much, that we will never be energy-independent while relying on oil as our main source of energy. And one of my fears is that drilling in ANWR will lend credence to the notion that the wolf is off the door vis-à-vis petro-carbons. Our best hopes for energy security lie in conservation and in alternative energy sources. We can drill ANWR all we want, but the companies who drill the oil there will be selling it to the highest bidder. Drilling in ANWR, or anywhere else in the US, won't make us any more independent when it comes to energy.
Regards,
Rich

Anonymous said...

Mark,
a quick question for you: Do you support the summer-long suspension of the Fedreal gas tax being proposed by McCain, and championed by Clinton? If yes, why?

Regards,
Rich

Mark Heuring said...

Thanks, gentlemen. I appreciate your thoughts.

SA, do you really believe that the oil companies don't want to build new refineries? Or might there be the little issue that it's well nigh impossible to jump through all the regulatory hoops to get one built? I guess if you're being asked to march into a bayonet, you don't have a lot of incentive.

Rich,

I think you're close. But you'll notice that I didn't say anything about oil independence in my post. That's not the issue. The main point is providing a signal to the overall market that supplies will not be artificially tightened. The weak dollar is a factor in the price spike, but I suspect that at least 25-30% of the cost is because of speculation that supplies are going to be even tighter. That's why every time some rebel group in Nigeria claims to have sabotaged a pipeline, the price goes up. It will indeed be a long time before any oil from ANWR reaches the market. But if the traders know that more supply is going to be consistently available, they'll stop speculating out of self-interest. And the price will go down over the long term, possibly considerably. The price has gone down about $7 this week and my guess is that we'll be back below $100 soon. In fact, I would not be surprised if oil is back below $75 by the end of the summer.

As for your question about a federal tax holiday for gas; I doubt it will make much difference. The majority of taxes on gasoline are levied by the states, which is the primary reason why prices in Minnesota are usually 8-10 cents lower than they are in Wisconsin and often 20 cents less than what you deal with in Chicago. We're generally still below $3.50 here (average is about $3.46 today); it looks like you guys are at about $3.80. And besides that, you guys drive on toll roads - talk about adding insult to injury!

There's more to say about the role of the federal government and how they use highway money as a truncheon, but that's another post, I think.

Anonymous said...

Mark,
thanks for your honesty on two counts. The first is not pretending that ANWR is about energy independence. You are one of the first Conservatives I have discussed this with that didn't pretend that this was the reason drilling ANWR was necessary. Second count is for not defending McCain's proposal to suspend the Fed Gas tax (or as John Stewart calls it, "Grampa gave me five dollars". It is a horrible idea for a variety of reasons, and I think Obama deserves some credit for not pandering to voters.
BTW, did you catch McCain's assertion yesterday that pork-barrel spending led to last spring's bridge collapse in Minneapolis? He is an endless supply of gaffes these days. You guys are lucky no one is paying attention to him.
Regards,
Rich