The Domestic Oil Drilling Farce

Republican Groups Deliberately Misrepresenting the Truth

There’s an idea spreading across the American political landscape that domestic drilling will magically provide relief at gas pumps across the nation.  This is a deliberate misrepresentation of fact. 

Oil is a commodity traded on the worldwide market through a speculative process driven by global supply and demand.  The price of oil on any given day is set regardless of where the oil comes from, because it’s traded globally. 

Oil is transported to the nearest oil market to reduce the transportation expenses incurred by the supplier.  More domestic oil wells in the United States do not reduce the price of the oil that has been set on the commodities market based on worldwide supply - it only enhances the profitability for the supplier because they don’t have to ship as far.  (See the Energy Information Agency (EIA) report about oil industry basics)  

There are no discounts offered to the oil purchaser because the transportation costs are lower.  It’s little wonder why oil executives have praised Senator McCain’s energy plan as being “awesome;” their already soaring profits will rise even further with more wells within the borders of their best customer.

According to the EIA, the impact of increased access to oil and natural gas from the Outer Continental Shelf (OCS), “… [will] not have a significant impact on domestic crude oil and natural gas production or prices before 2030.”  McCain has claimed to have spoken to unnamed “oil executives” who told him the oil and gas from the OCS would show results “in a couple of years.” 

The news media should press McCain about who those oil executives were and exactly what was said with regard to this critical issue for our nation’s security future.  My own engineering source, speaking on the condition of anonymity called the remark, “Ludicrous.  It takes longer to build the rig.”  That source’s statement is confirmed by a representative from PFC Energy in a report published at PolitiFact.

Several other disturbing facts are predicted by EIA reports that further erode the idea that OCS or Anwar oil will be a potential boon for American consumers.

The EIA’s International Energy Outlook 2008 report expects the global demand for oil will rise by 28.9 million barrels per day between 2005 and 2030.  That compares poorly to the estimated 2 million barrels per day of supply expected from OCS sources in the same timeframe.  In other words, demand will rise a whopping 34.5 percent while the OCS will only be able to offset 1.7 percent of the increased demand.

But it gets worse.  The agency also predicts there will be a worldwide oil production peak between the years of 2013 and 2037, which means the world’s overall supply of oil will begin declining on a permanent basis while we’re just starting to get oil from the OCS.  Given the laws of supply and demand, the price of oil will rise dramatically regardless of the new OCS supply, because overall supply will be in decline.  Permanently in decline.

McCain’s assertion that OCS drilling will help American consumers is a complete fraud.  And there’s no kind way to say that.  This is shameless huckstering at its worst, and the energy issue is far too important to be misrepresented to the people of the United States who depend upon genuine knowledge, intelligence and leadership from our representatives.

While it certainly makes some sense to exploit reserves that are easily available to the country, the only possible benefit from this course of action is to minimally stabilize our supply in a world that increasingly uses energy as a political weapon.  This tactic most recently surfaced between Russia and the Ukraine last winter and does not bode well for the U.S. after peak oil production is reached.  However, the OCS production rate will only stabilize about one percent of the daily U.S. consumption when it finally does reach full capacity.  This is a serious problem, because economic warfare has resulted in our fiercest shooting wars, and energy is a worldwide issue.

The American consumer’s only hope for relief at the pump is reduced demand, because we do not - indeed the world does not - have the capacity to significantly increase oil supply.

Reduced demand halted the meteoric rise in oil prices earlier this year, and prices have continued to slide ever since American road travel dropped by 4.3 percent or about 11 billion miles a quarter.  When the Conservative “think” tanks complain about “soaring” oil costs, they’re just scaring people.  We’ve enjoyed about three months of declining prices, but it’s not enough and it’s happening too slowly.

America should invest its considerable intellectual and financial capital in further reducing oil demand through the use of alternative fuel research and development. 

Another possible method to reduce oil consumption is to encourage telecommuting through business tax relief legislation, but neither Obama nor McCain has suggested such a common sense approach despite the fact that ours is the most highly developed telecommunication system in the world.

It’s very discouraging that a humble blogger can so easily locate the real facts and figures behind an energy situation that both candidates have called a “national security threat.”  Let’s all pray the winner of the election applies a little more research and thinking to more immediate security threats once he takes office.  But it doesn’t look good now.

Please send this story to friends and other concerned parties using the recently added email feature below.  The only defense against a lie is a widely shared truth.