Let’s Talk some ‘Common Sense’ about Oil
The Bear on Jun 24 2008 at 8:30 am | Filed under: Energy Policy
The price of gas at the pump has moved to the forefront as the number one issue in this campaign season. For the political establishment in Washington it is a do or die scenario, it can get you reelected or send you home to an early retirement. Personally, I like the idea of early retirement for many of the spineless people we have in Washington.
First of all, there is no escaping the fact that America is an oil based economy. Believe it or not oil refined into gasoline for our cars and trucks represents only a small amount of our usages for oil.
Oil is in and touches our every day lives as it is needed to produce energy for our buildings, fuel for transporting our food, the every day byproducts and goods that are produced from oil and our National Defense. Our standing Army would be walking without the fuel to keep the planes flying and our ships running.
The Messiah, Obama says that drilling now would have no appreciable impact on gas prices. This one statement in itself shows how weak that this man has about economic markets and how they function. BHO is totally clueless and this should be a concern to every voter.
Two things affect the price of oil, availability and the value of the dollar. Look it up Senator availability is also known as “SUPPLY and DEMAND.” The minute that the world sees that America is serious about drilling for oil, the price of a barrel will drop dramatically and this is what Obama says “would have no appreciable impact.”
The minute that the world sees that America is serious about drilling for oil; this will automatically strengthen the value of the dollar because it will reduce our TRADE DEFICIT. Instead of sending billions of dollars to people who hate us by drilling domestically we will be adding trillions of dollars to our won economy.
These two actions over time could reduce the cost of a barrel of oil by $50. That is appreciable, Senator. And then there is another benefit to drilling domestically…jobs, jobs and more jobs! A Wharton Econometrics study (hat tip to Mark Perry at Carpe Diem) shows that total employment at full production in ANWR would come to 735,000 new jobs created across the country, not just in Alaska.
A recent real time poll by Rasmussen Reports showed that the American Public is in favor of domestic drilling by a 4 to 1 ratio. The message is loud and clear and Washington better get it or face a voter revolution.
The people of this country are downright angry and mad about our FAILED energy policies of a DO NOTHING and NO DRILL Congress. They want America to start recovering our own reserves of oil, including oil located offshore.
Sure, the lag time between drilling and new oil coming online takes years but the longer we wait the longer relief will take. And if Washing didn’t jack around with this issue over the past two decades and Bill Clinton didn’t veto drilling in ANWR in 1996 this oil would be online today.
Just One More Thing: The Myth of “Big Oil”
There are five major American Companies that have been dubbed “Big Oil” lead by Exxon Mobil which is the United States’ largest corporation. In total they control about 6% of the world’s oil reserves while about 85% is controlled by foreign governments.
Just look at this logically and tell me how 6% could control and manipulate the world wide price of oil.
So when Congress has there made for TV show trials bashing “Big Oil” they are deflecting the public’s attention away their own ability to solve the problem and mask the real problem makers. CONGRESS!
There has probably been more than a dozen of these “Show and Blow” trials over the years and never ONCE has any oil company been found guilty of manipulating the market price. Just what does that tell us.
Related
The facts about non-producing federal leases:
CLAIM: Oil and natural gas companies are given leases by the government and purposely don’t produce from them to increase prices.
FACT: Companies pay billions of dollars for the right to explore on federal lands. If the company does not produce within the lease term, it must give the lease back to the government, and the company does not recover the billions of dollars it may have invested.
CLAIM: Companies let many of their leases sit idle and don’t produce them
FACT: Companies actively develop their leases – but not every lease contains oil or natural gas in commercial quantities. In many cases, the so-called “idle leases” are not idle at all; they are under geologic evaluation or in development and could be an important source of domestic supply. However, this does not mean all leases have the potential to produce. Companies can evaluate leases for several years only to determine that they do not contain oil or natural gas in commercial quantities. The road to bring the oil and natural gas to market — obtaining the lease, evaluation, exploration and production — is a long and complicated one.
CLAIM: If the lease doesn’t contain oil or natural gas, then the company shouldn’t have bought it.
FACT: There are tremendous risks and challenges involved in finding and producing oil and natural gas. There is no guarantee that a lease will even contain hydrocarbons. It is not unusual for a company to spend in excess of $100 million only to drill a dry hole. A company usually has only has limited knowledge of resource potential when it buys a lease. Only after the lease is acquired, will the company be in the position to evaluate it, usually with a very costly seismic survey followed by an exploration well.
CLAIM: There’s absolutely no reason for a company not to produce if it finds oil or gas on the lease.
FACT: If the company finds resources in commercial quantities, it will produce the lease. But there can sometimes be delays – often as long as seven to 10 years – for environmental and engineering studies, to acquire permits, install production facilities (or platforms for offshore leases) and build the necessary infrastructure to bring the resources to market. Litigation, landowner disputes and regulatory hurdles can also delay the process.
CLAIM: The vast majority of federal and gas resources are already available for development.
FACT: In the Lower 48 states, about 85 percent of the Outer Continental Shelf and 67 percent of onshore federal lands are off-limits or facing significant restrictions to development. There is no way, at this stage, to determine exactly the extent of the resources off-limits because many of these areas have not been subject to inventory studies in decades.
CLAIM: Non-producing leases could provide a major source of new supplies.
FACT: Many of these leases will provide a major source of new domestic supply once they are developed. Companies are actively developing the leases, and in addition to paying for the lease, they must also pay rent to the government while they conduct development and exploration efforts. But this process takes time. Reducing the time companies have to develop a lease or increasing the costs imposed by government will not increase supply for American consumers. Nor will denying access to areas of oil and natural gas potential like the Atlantic and Pacific OCS.
CLAIM: Increased domestic drilling activity has not led to lower gasoline prices, and more leases and drilling won’t help either.
FACT: Our nation needs more supplies of all forms of energy, including domestic oil and natural gas, to meet its growing energy demand. Increased drilling has helped the United States offset the natural declines in domestic oil and natural gas production from older fields. Greater drilling activity tends to produce more supply. Fundamental economics suggest that additional supplies put downward pressure on prices.
CLAIM: Companies should be penalized for not producing from their leases.
FACT: Oil and gas companies take all the risk with federal leases. Not only do they pay billions to obtain leases, they pay to hold them while they are spending even more capital to determine if these leases contain resources. Penalties on leaseholders on top of those fees would only discourage U.S. exploration and production, at a time when the United States needs all the energy it can get.
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