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  • Will More Drilling Mean Cheaper Gas?

    Wednesday, Jun. 18, 2008
    Will More Drilling Mean Cheaper Gas?
    By Bryan Walsh

    On Wednesday morning President George W. Bush urged Congress to overturn a 26-year ban on offshore oil drilling in the U.S., and open a part of the Arctic National Wildlife Refuge (ANWR) for petroleum exploration. Flanked by the secretaries of Energy and the Interior, Bush also proposed streamlining the construction process for new oil refineries, and explained that these moves would "take pressure off gas prices over time by expanding the amount of American-made oil and gasoline." Coming a day after Republican presumptive presidential nominee John McCain made a similar appeal to enhance domestic oil exploration, Bush was sending an unsubtle election year message to the American public: I care about the economic toll of $4 a gallon gas, and Democrats in Congress, who have opposed such an expansion, don't.

    But there's a flaw in that logic: even if tomorrow we opened up every square mile of the outer Continental Shelf to offshore rigs, even if we drilled the entire state of Alaska and pulled new refineries out of thin air, the impact on gas prices would be minimal and delayed at best. A 2004 study by the government's Energy Information Administration (EIA) found that drilling in ANWR would trim the price of gas by 3.5 cents a gallon by 2027. (If oil prices continue to skyrocket, the savings would be greater, but not by much.) Opening up offshore areas to oil exploration — currently all coastal areas save a section of the Gulf of Mexico are off-limits, thanks to a Congressional ban enacted in 1982 and supplemented by an executive order from the first President Bush — might cut the price of gas by 3 to 4 cents a gallon at most, according to the Natural Resources Defense Council. And the relief at the pump, such as it is, wouldn't be immediate — it would take several years, at least, for the oil to begin to flow, which is time enough for increased demand from China, India and the rest of the world to outpace those relatively meager savings. "Right now the price of oil is set on the global market," says Kevin Lindemer, executive managing director of the energy markets group for the research firm Global Insight. President Bush's move "would not have an impact."

    The reason is simple: the U.S. has an estimated 3% of global petroleum reserves, but consumes 24% of the world's oil. Offshore territories and public lands like ANWR that don't allow drilling may contain up to 75 billion barrels of oil, according to the EIA. That may sound like a lot, but it's not enough to make a significant difference in a world where global oil demand is expected to rise 30% by 2030, to nearly 120 million barrels a day. At best, greatly expanding domestic drilling might eventually lower the proportion of oil the U.S. imports — currently about 60% of its total supply — but petroleum is a global commodity, and the world market would soak up any additional American production. "This is a drop in the bucket," says Gernot Wagner, an economist with the Environmental Defense Fund.

    Still, with Americans hurting at the pump, it may be difficult for environmentalists and other opponents of increased domestic drilling to resist the push for more oil, whatever the cost. As recently as his 2000 Presidential run, McCain had been against offshore drilling, but he changed that position Tuesday, arguing that individual states should decide for themselves. (He remains against drilling ANWR, however, pointing out that "we called it a 'refuge' for a reason.'") The Republican Governor of Florida, Charlie Crist — considered a possible vice-presidential candidate — also flip-flopped, backing McCain's position. Though Democratic Senator Barack Obama and most of his party are against the proposed expansion, McCain and his supporters may have the public on their side: a recent Gallup poll found that 57% of Americans believe we should open up new territories to drilling. "It could help in the long term," says Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. Still, he acknowledges that even expanded drilling is unlikely to bring prices down much.

    Though offshore drilling conjures up fears of catastrophic spills, the petroleum industry rightly argues that safety measures have improved considerably in recent years. A 2003 report by the National Research Council found that only 1% of the oil that entered U.S. waters came from petroleum operations, like the offshore drilling platforms that run in the Gulf of Mexico — which also weathered Hurricane Katrina without massive spills. If it can be done in an environmentally friendly fashion — and with oil companies themselves footing the bill — opening up some new territory to drilling might be worth it. The reality is that our economy will run on petroleum for the foreseeable future, and that while investing in alternatives is the only way to secure truly low-cost energy over the long-term, we'll still need oil for decades more. But any attempt to increase supply must be coupled with even heavier investment in energy efficiency and other methods to decrease oil demand — an approach that, to his credit, McCain has said will be a key part of his energy policy (although in the Senate he has skipped or voted against every fuel efficiency bill since 1990, according to the League of Conservation Voters). In any case, Bush's plan is unlikely to be realized — the Democratic-controlled Congress remains against it, and Bush can't open up the new territory on his own.

    Even as Democrats and Republicans squabble over a relatively small amount of petroleum, we're missing out on the opportunity to truly break our addiction to crude. This week the Senate again failed to renew the tax credit for renewable energies like solar and wind; the credit, which expires at the end of the year, is key to the healthy growth of low-carbon alternatives. Without it, "the industry will simply stop," says Santiago Seage, CEO of the Spanish company Abengoa Solar. With energy demand skyrocketing, we'll need more oil, and alternatives like solar, and demand-side measures like toughened auto fuel efficiency standards, or tax incentives for Americans to purchase less wasteful cars. We'll have to include action on global warming, like the recently defeated Warner-Lieberman carbon cap and trade bill. A study by the Massachusetts Institute of Technology found that under the bill, U.S. petroleum consumption would drop by nearly half by 2030 — savings far in excess of the amount of oil we could ever pull from Alaska or the coasts. "We can't drill our way out of this and we can't conserve our way out either," says Bullock. "We need both." Fair enough. But the sad truth is that neither drilling nor conservation will have an immediate effect on rising gas prices, even if they do have an immediate impact on the presidential race.
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  • #2
    Interesting. I've heard and read that the price of oil is due in large part to speculators. (http://www.businessandmedia.org/prin...624115730.aspx, http://www.msnbc.msn.com/id/15715744/) I'm not sure whether it's true or not, and to what extent, but it's possible.

    There's a movie about life after petrol: http://youtube.com/watch?v=fSg1J-REGqM Looks like it might be an interesting film.

    Comment


    • #3
      I don't understand the resistance to drilling our own vast resources of oil. Even if prices aren't affected immediately and it takes the ten years pessimistic pundits claim, won't we still be better off at some point than we will if do nothing? Only a moron (i.e.: Harry Reid and Nancy Pelosi) would think otherwise.

      If we had drilled new wells and built new refineries during the past twelve or more years, wouldn't we be better off right now? What logic could refute that?

      Do you like the fact that China is off the coast of Cuba drilling oil reserves that should be our's?

      And since speculators are blamed in some part for the rise in prices, isn't it clear that if new sources of oil were coming online, that future supplies will be growing and the price will be driven down by speculators? When GW Bush dipped into the nat'l oil reserves to help with a short supply, the price of a barrel of oil dropped overnight by a third!

      I read a few days ago a story about so many automakers developing entirely electric vehicles. Even if you are one of the millions that can get by daily on a 20 to 40 mile range of operation, what if such vehicles become popular and widespread? Our electric grid is already operating at near capacity. Where is all the additional electricity going to come from? We will need to either burn more coal (pollution) or build more Nuclear Power Plants. Will your backyard be OK for that?

      The same people that have consistently thwarted efforts at drilling more oil or building alternative power plants (all workable, economically feasable solutions) are the same ones blaming every one but themselves for the problem they created.

      It is great that alternatives are being developed and there should be multiple sources for our energy needs. I am excited about the new algae technologies being developed that seems to hold so much promise. But until the new technologies are developed and the infrastructures built to support them, we need the old standbys.

      Will prices ever come down? Sure. Somewhat. But the oil companies have learned we will still buy gas at inflated prices. We just taught them. As an example, the Hunt brothers drove up the price of silver in the seventies from $2 to $54 an ounce in 1979 before going bankrupt and silver plummeted. Eastman Kodak was the world's largest user of silver for the manufacture of film and print papers. They were forced to raise the price of film from a dollar to several dollars per roll. When silver prices fell back to previous levels, Kodak never lowered the price for film or print products. They discovered what the market would bear! Wouldn't you too decide to keep the profits?

      I blame Al Gore for creating the Global Warming fraud that fueled the mess we are in now.

      I blame everyone that has more than two children for over-population which is the underlying force driving any and every crisis you can think of today.

      I blame every American that purchases foreign made products, especially cars. Admittedly, since Clinton gave China favored nation status and with the affects of NAFTA and other treaties, it is difficult to buy solely American made products. But the US Dollar has become devalued due to unwise American spending habits. Many blame that for the high cost of oil.

      I blame the democratic controlled congress for the current high prices that occurred the moment they took control and those idiots on both sides of the aisle demonstrate all manner of excuses to do nothing about it but continue to make matters worse. They would rather tax the Oil Companies with a windfall profits tax which will be paid by who? - right the consumer!

      Get government out of the way and let our free market system solve the problem - it always does. If the US economy falls apart (as it is on the brink of doing) and America goes the way of the Soviet Union, who will be there to care about "Saving The Planet" if not us?

      Drill Here - Drill Now!
      Research, Think, then VOTE!
      A Latter Day American

      Comment


      • #4
        ok , oil prices are largley pushed by speculators. primarily because deregulation allowed them to speculate with out taking delivery. If you take delivery you gotta have some place to put it. I can buy 10000 barrels and I don't care because I don't have to take it as delivery................ thank you congress of 2006.. I can sell short or buy it doesnt matter. I can make money on either side because I don't have to take delivery. Hey I was a stock broker for years.. you can always make money in any position.
        The USA has 1 percent of the worlds oil reserves. drill your ass off pull every bit from the ground.. it won't make a heck of a big difference any way. we still gotta buy it on the open market. drill Alaska, national parks, the gulf, where ever you like. Oil independence is a fantasy. 1 percent of the worlds oil means diddly.

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        • #5
          Beats the heck out of me!! I filled up in Memphis Tues for 3.04 a gal today it was 3.25! WTF!?
          You don't have to be perfect, but you better be smart!!!

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          • #6
            We could be swimming in oil and the industry would continue to make record profits while maintaining the economic stranglehold on us peasants .... our govmnt would guarantee it.

            O.W.
            Things are seldom what they seem.

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            • #7
              1. Speculators suck and are a huge reason for current prices
              2. We are sheep out of necessity in this. We agree to pay more because there is no competition.
              3. Hell yes, we should be drilling our own lands and shores. If we don't, "they" will or will be sold the rights to do so.
              4. Fossil fuels will always win out so long as alternatives are so expensive and underdeveloped.
              5. The industry should self-regulate. The government taking my tax dollars to push solar down my throat... sucks.
              6. Hydrogen - Joke, for a lot of reasons (efficiency, cost, infrastructure)
              7. Tar Sands - ya, okay, but very hard/expensive to get to
              8. Off shore drilling - check
              9. Alaska drilling - check
              10. Natural gas exploration - BIG check
              11. Coal - BIG check
              12. Nuclear - check
              13. Go balls-out on 8-12 and let the private sector work out the battery/solar issues (w/o gov funding!!!)

              RA
              Last edited by Recently_Awoken; 10-13-2011, 02:55 PM.

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              • #8
                the latest from CNN is that wallstreet speculation will add $600 to the gas expenses of the average family. Think about this.... we no longer have regulation on oil speculation because we no longer require delivery or storage. How much do you like regulation when it is in your pocket book. I hate regulation. I am happy to spend $600. more per year on gas as long as my wealthy friends can make some money on it. I want to pay more at the pump if my compadres can make some dough. they share with me......... don't they? I am sure your friend do. I have a friend at Shell he brings me a rosted Walmart chicken every couple of weeks. wow cool. I want to vote for that. Drill baby drill................ drill every where.............. lets give the bonus to our friends.... ya!!
                We control roughly 1 percent of the worlds oil reserves........ do you think for one minute that we won't have to keep importing?? I lived through the oil embargo of the early 70's lets do gas lines again. my friends need some more money. more gas lines baby!!

                Comment


                • #9
                  Originally posted by wyatt265 View Post
                  the latest from CNN is that wallstreet speculation will add $600 to the gas expenses of the average family. Think about this.... we no longer have regulation on oil speculation because we no longer require delivery or storage. How much do you like regulation when it is in your pocket book. I hate regulation. I am happy to spend $600. more per year on gas as long as my wealthy friends can make some money on it. I want to pay more at the pump if my compadres can make some dough. they share with me......... don't they? I am sure your friend do. I have a friend at Shell he brings me a rosted Walmart chicken every couple of weeks. wow cool. I want to vote for that. Drill baby drill................ drill every where.............. lets give the bonus to our friends.... ya!!
                  We control roughly 1 percent of the worlds oil reserves........ do you think for one minute that we won't have to keep importing?? I lived through the oil embargo of the early 70's lets do gas lines again. my friends need some more money. more gas lines baby!!
                  "One percent?" With respect, neither you nor I know what's under the gulf floor. If BO is willing to sell drilling rights to South America, only to buy back to oil they retrieve... and they're down with that... I'm guessing it's on the north side of 1% of the world's oil reserves (just in the gulf). And while we're on that topic, and with respect, you don't have any idea what the Saudi's "REALLY" have under the sand. The minute they admit they've reached peak... well, they'll never admit that.

                  As far as speculation and regulation goes... my point is, I can't stick a solar panel on my car and make it go. And I can't afford the $100K+ Tesla, and quite frankly, the other domestic electrics available appear to be crap. What BO and lefties don't get is this... America is not Europe. Can't be Europe. Don't want to be Europe. Never will be Europe. We're spread out. Our infrastructure is vastly different. Our geography doesn't lend itself to mass transit. And green technologies, while I'm sure that is the future, if the gov shoves this down our throat through regulation and legislation, our country will be a very different, undesirable place to be.

                  RA

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                  • #10
                    All I know if gas keeps going up I am going to have to bicycle to work
                    NONSOLIS RADIOS SEDIOUIS FULMINA MITTO

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                    • #11
                      Don't think so...all the easy oil is about depleted. It will be more expensive to drill from now on.
                      http://ryeder.wordpress.com/

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                      • #12
                        Originally posted by Iron mike View Post
                        All I know if gas keeps going up I am going to have to bicycle to work
                        I didn't know they had bicycles on ships.
                        "The enemy is the necessary condition for practicing patience."

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                        • #13
                          no, neither you or I do not know what is under the gulf floor. anticipate that it is much less than Saudi oil. I have a good friend that is an engineer for Shell for 30 years. Though you and I do not know what is under the gulf floor he has a fair idea.................. don't look good my friend........... don't look good.

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                          • #14
                            no

                            when we:

                            A) pull of Iraq ? combat units, with exception to the MERCS

                            B) Start shit with Iran

                            C) Barry's great adventure into Central Africa...

                            D) who knows who else he is going to go to war with?

                            Comment


                            • #15
                              ok son I might be talking to teens here that did not live through the oil embargo of the Nixon years and did not sit in gas lines for hours on end just to get a few gallons. Thats ok you can dream your dream but you ain't lived it buddy

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