Tornado Alley (PROG)

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Drill Baby Drill, Redux
Published: March 4, 2012

It’s campaign season and the pandering about gas prices is in full swing. Hardly a day goes by that a Republican politician does not throw facts to the wind and claim that rising costs at the pump are the result of President Obama’s decisions to block the Keystone XL pipeline and impose sensible environmental regulations and modest restrictions on offshore drilling.
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Next, of course, comes the familiar incantation of “drill, baby, drill.” Mr. Obama has rightly derided this as a “bumper sticker,” not a strategy. Last week, he agreed that high gas prices were a real burden, but said the only sensible response was a balanced mix of production, conservation and innovation in alternative fuels.

There are lots of reasons for the rise in gas prices, but the lack of American production is not one of them. Domestic crude oil production is actually up from 5.4 million barrels a day in 2004 to 5.59 million now; imports have dropped by more than 10 percent in the same period. Despite a temporary slowdown in exploration in the Gulf of Mexico after the BP oil disaster, the number of rigs in American oil fields has quadrupled over three years. There have been new discoveries and the administration has promised to open up more offshore reserves. To say that Mr. Obama has denied industry access is nonsense.

Equally nonsensical is the Republican claim that Mr. Obama’s proposed repeal of $4 billion in annual tax breaks for the oil and gas industry — whose five biggest players posted $137 billion in profits last year — would drive prices upward. As is Newt Gingrich’s claim that a proposal now taking shape in the Environmental Protection Agency, and fiercely opposed by refiners, to lower the sulfur content in gasoline would add 25 cents to the cost of a gallon. Agency experts say it would add about a penny.

The truth is that oil prices are set on world markets by forces largely beyond America’s control. Chief among these is soaring demand in countries like China. Unrest in oil-producing countries is another factor. The Times noted fears in some quarters that gas could jump to $5 a gallon if the standoff with Iran disrupted world supplies.

Therein lies the biggest weakness in the Republican litany. A country that consumes more than 20 percent of the world’s oil supply but owns 2 percent of its reserves cannot drill its way out of high prices or dependence on exports from unstable countries. The only plausible strategy is to keep production up while cutting consumption and embarking on a serious program of alternative fuels.

American innovation is a big part of the answer. Two byproducts of the automobile bailout were the carmakers’ acceptance of sharply improved fuel economy and a new commitment to building cars that can meet those standards. The new rules are expected to cut consumption by 2.2 million barrels a day — more than America now produces in the gulf. These and other measures are not nearly as catchy as “drill, baby, drill.” But they have a far better shot, long term, of lessening this country’s dependence on oil imports and keeping gas prices under control.

A version of this editorial appeared in print on March 5, 2012, on page A18 of the New York edition with the headline: Drill Baby Drill, Redux.

2 Comments

walterrhett
Charleston, SC
Trusted

Even Bulgaria this winter, after Russia (claiming shortages!) shut of the country's natural gas supply pipeline during 3 weeks of Europe's worst winter in years, voted down fracking.

If you think fracking is safe, here's a short video provided by Chesapeake Energy (3:30m): http://wp.me/p1mBVu-EW. Think about what's left in the ground, leeeching into the water supply.

There is a huge disconnect if we think increasing production will bring down US prices of gasoline, fuel oil, and reduce petroleum related costs. US companies, like all private companies, will sell unrefined or refined oil at market rates. The only way to reduce the price would be to nationalize the oil companies! Brasil did, and its nationalized company, Petrobras has the world's 4th largest energy market cap and is exchange-traded. But the US would reject such a model.

Talk of drilling is just that. It's a shorthand that skips the difficulty, dangers, and costs associated with extracting oil that we would not control; instead going into private hands at prices set beyond our influence or regulation. We could regulate--but that's socialism. Or we could pretend. That's what we are doing now.

Bush, an oil man, didn't close the gap or lower prices in eight years, but now we blame Obama. If you want lower prices, seize the means of production; there's plenty of private profit to reduce the price!

No? Buy a bicycle, or a battery powered vehicle. Or blame Obama.
March 5, 2012 at 4:08 p.m. Recommended 16
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Bill Appledorf
San Francicso
Trusted

Bernie Sanders explains in this video that speculators in the oil and gasoline futures markets are the cause of high gas prices:

http://www.sanders.senate.gov/newsroom/media/view/?id=239982ed-6495-4fe7...

The solution is to curb speculation in the futures markets. The way to do this is to prohibit gamblers who have no intention or ability to accept delivery of the commodities they buy contracts for from participating in the market.
March 5, 2012 at 3:24 p.m.
Recommended18

http://www.nytimes.com/2012/03/05/opinion/drill-baby-drill-redux.html?_r=1&hp