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The politics of drilling
Posted by: McQ on Friday, June 20, 2008

It may loom large in this election.

As it now stands, Obama is staunchly in the "we won't drill" camp.
“Opening our coastlines to offshore drilling would take at least a decade to produce any oil at all, and the effect on gasoline prices would be negligible at best since America only has 3 percent of the world’s oil,” Obama said in a statement that did not explicitly distinguish between oil and gas drilling.
It is the same old tired argument that has been used for not drilling in ANWR. But most people won't buy it this time because they realize that had we drilled in ANWR 10 years ago, that oil would be now flowing, and helping the situation. Had we pursued such a policy on the OCS, at the same time, we most likely wouldn't be in the crunch we are now.

And even though it is government that has put the vast majority of drilling off limits for decades, Obama finds a way to blame Bush and big oil for the present energy problem:
And yet, we also know that this problem goes deeper than the Bush administration. We’ve been talking about high gas prices in this country since the gas lines of the 1970s. But nothing has changed – because the big oil and gas companies keep using campaign dollars and corporate lobbyists to block reform. And when the next election rolls around, we’re even more dependent on foreign oil, our planet is in even greater peril, and the price of gas is even higher.
Why would "big oil and the gas companies" block opening areas for exploration and exploitation on the OCS and other areas?

Well of course they wouldn't - nor would they block new refineries and they certainly have nothing to do with our dearth of nuclear power plants in the last 30 years. So Obama's arguments don't address the core issues and are unlikely to be convincing or resonate with the public. They are, instead, simply boilerplate leftist rhetoric with no grounding in reality.

Obama seems not to understand something John McCain quickly figured out - driven by $4 gas, there is a significant shift in public opinion concerning drilling going on right now. And it is unlikely to change before the election.

The issue has also started to fracture the Dems a bit. Jim Webb, Senator from VA and named as a possible running mate with Obama has publicly come out for drilling off the coast of VA. Although he claims his support only pertains to natural gas, drilling is still drilling:
Webb wants his home state to have the right to explore for energy off Virginia’s coast. His staff insists his proposal pertains only to natural gas, and not oil, and that it is completely in line with the state’s other two leading Democrats — Gov. Tim Kaine and former Gov. Mark Warner, who is running for Senate.
A Florida Petroleum Institute representative has said that within FL, there has been a "sea tide of change" in attitude that is now "supportive to great magnitudes". And, in fact, FL governor Crist is now supportive of the idea.

In fact, according to Rasmussen, most Americans are supportive of it.

At the moment, that is helping John McCain, who has come out in favor of drilling. An editorial in today's Denver Post shows how that's playing:
John McCain deserves credit for expanding the nation's energy debate to include such potent but politically controversial solutions as nuclear power and drilling for oil on the continental shelf.
Some Democrats are seeing this as a building problem for Obama, and are ready to chuck their 30 years of "principled opposition" over the side if it will buy them a few votes.

Jerome Armstrong of My DD is typical:
The politics have changed, and I don't see the principle that guides Democrats to be unequivocally against offshore drilling for oil at this point. We are stuck on oil for a long time. Congressional Dems should adopt the position, include some safeguards, and alongside billions in funding for finding alternative fuel solutions, make it part of a long-term solution.
Of course that would be an actual energy policy, something which Congress has had the opportunity to pass for decades.

How easy would it be for Obama to slip the unequivocal position of not drilling. Well, if Armstrong's feedback is any example, not easy. After taking a bunch of flak for the paragraph above, Armstrong fires back:
First of all, I don't care if you word it differently, the poll numbers in Ohio (71 - 18) are not going to change the outcome that much by changing the wording. Second, we're talking about leveraging the short-term solution that Bush has offered up as a means to get a long-term solution in place, not about whether drilling for oil offshore is legitimate as a solution. Third, the ideological purity position of there being an environmental/aesthetic argument against it is exactly the position the Republicans want us to adopt.
Armstrong actually gets it. But, apparently many on the left - and my guess is that includes Obama - don't. That ends up being a very big plus for the Republicans.
 
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Comments
This should be an issue that the Democrats own. I would think that the traditional "party of the people" would want the domestic investment in industry leading to tens of thousands of new high-paying jobs here in the US. That would do wonders to shore-up the losses due to manufactuing declines and provide an option to low-skill workers aside from Wal-Mart. Not to mention a lower trade deficit, a stronger dollar, lower inflation, etc. The latter
is totally meaningless to all but parsimonious bean-counter business types, of course.

Seriously, though, this should be a no brainer as it fits the usual D "hard working men and women" talking points to a T. That is, unless, the entire premise of Democratic campaign points rests on there being permanent grieveance with the powers-that-be rather than actually trying to solve anything.
 
Written By: CR
URL: http://
Let’s talk about the craft labor jobs to be created from building those 45 nuclear reactors that McCain has proposed. Of course, 34 reactors are already in the queue at the Nuclear Regulatory Commission so McCain is only proposing another 11 over what private enterprise has already put their money on.

A typical two reactor plant creates between 10,000 and 16,000 man-years of direct construction labor. This is boilermakers, welders, electricians, concrete workers, computer technicians. That’s about 250,000 man-years of largely union, and certainly well-paid, labor just at the plant site per McCain’s proposal. Just preparing an application takes about $150 million of engineering and, while major components are usually foreign-sourced, there are lots of American-made products installed.

Here in California we see political support for new nukes from labor organizations in a break from their usual support of Democratic office holders.

If you’re a union man, why would you vote for Obama and higher gas taxes and energy prices when you can vote for McCain and cheaper energy with great jobs to boot?
 
Written By: Joseph Somsel
URL: http://
If you’re a union man, why would you vote for Obama and higher gas taxes and energy prices when you can vote for McCain and cheaper energy with great jobs to boot?
indoctrination is a hard thing to break
 
Written By: capt joe
URL: http://
Obama did sell out the primary cause of his professional life, all for a tiny political advantage. If he’ll sell that out, what won’t he sell out?
Obama is now plain for anybody to see. He will say whatever it takes to get elected. And I do mean whatever.
 
Written By: Neo
URL: http://
The optimum position for oil companies would be to take over as much US supply as possible while not driving down the price. They’ll accept some price drop, but why double production with the increased hassle and cost if you drop the price in half? The US oil companies aren’t about to kill the golden goose.

In theory no change would happen if OPEC & Friends cut back from what they would have otherwise produced.

Considering the Saudis increased production ~1/2 million/day last month and this month, I no reason to not believe Saudis are not capable of holding back to manipulate price.

Even so, world demand increases will gobble up increased production.

So between OPEC manipulation and increased global demand, the price isn’t going anywhere on drilling alone.

But that’s not what the public is being lead to believe nor all it wants. They want some of the current price reversed and they are being lead to believe drilling will do this, although not deliberately by most.

If/when gas price drops don’t come through, the Democrats will gain a huge political cludgel to prevent future drilling.

So minds need to be kept open to other sources of energy besides more drilling. Becoming single minded on drilling is a political and pragmatic dead end.
 
Written By: jpm100
URL: http://
Actually JPM it would be in the best interest of the American Oil companies to drive down prices and thus seize more market share. and at the same time stave off a massive turn of the public toward electric and hybrid cars.

The Democrats not only have no credibility on this, they have no plan and no clue.

If we can’t "drill our way out of our problems" then what do they offer?

Higher taxes, no drilling, and no nuclear. Yeah, like that is going to help.

 
Written By: kyleN
URL: http://impudent.blognation.us/blog
You ask some questions about what the "Big Oil Companies" would do. But do we really need to get hypothetical here? Who do you think wrote the Bush/Cheney energy policy?
 
Written By: Retief
URL: http://
Who do you think wrote the Bush/Cheney energy policy?
More relevant than that, who wrote the last energy bill?
 
Written By: McQ
URL: http://www.QandO.net
Could you be specific about what the Bush/Cheney energy policy is?
 
Written By: Jeremy Bowers
URL: http://www.jerf.org/iri
In theory no change would happen if OPEC & Friends cut back from what they would have otherwise produced.
Except that OPEC countries will get a smaller slice of the pie if they cut back with no effect on price. Basically, expect the perfumed princes in the plush hotel lobbies of Geneva will agree to stiffened quotas and that nobody will adhere to them.

I have long found the "OPEC as price manipulator" argument to be pretty thin gruel given the widespread producer quota cheating that went on in the early ’80s eventually leading to periodic price dips below $1/gallon. The market fundamentals are different now but the same motivations to cheat exist and OPEC has no enforcement mechanism to speak of.
 
Written By: CR
URL: http://
Depends when Jeremy. The Energy Task Force basically poiled down to "make anything the oil and energy (don’t forget this was pre-Enron bancruptcy)companies want to do easier." There was a bill in 2005 that pushed that along too. Of course one might consider other Bush policies related to energy; one clue to the Bush/Cheney energy policy come from here.

CR, while you’re certainly right about OPEC not pumping less to keep prices up, how much difference on prices will an additional 3% to domestic production, and that only in 2030, really make?
 
Written By: Retief
URL: http://
So, Retief, what’s your answer besides ’waaaaaaaaaaaaaaaaaaa evil big oil’
 
Written By: looker
URL: http://
Oh, right...there isn’t one.
Things you don’t like, like domestic drilling, or refineries, it’s "do nothing because it won’t fix the problem right now!".

Which is suprisingly opposite the answer you clowns give for Global Warming, a thing you aren’t even sure exists, let alone what it’s cause is...
Then you guys are ALL for DO SOMETHING NOW!, even if you aren’t sure it will fix the problem, even if you aren’t sure what’s causing the problem!

And in both cases, whine and blame the Republicans for the problems.

It’s amazing some of you people can manage to feed yourselves.

 
Written By: looker
URL: http://
how much difference on prices will an additional 3% to domestic production, and that only in 2030, really make?
3%? Uh, no. Tally up the ANWR, OCS, Bakken and Barnett shale formations, Eastern Gulf of Mexico and, conservatively there is somewhere around 50-100 billion bbl of economically extractable conventional crude. That is a sight more than 3% of our currently producing reserves. I suspect we can get several Mbpd of new long term sustainable production once all that is up an running.
 
Written By: CR
URL: http://
CR, you don’t need to suspect. Allow me to refer you to this actual study of off-shore oil possibilites.

looker, my answer to what? Whether current restrictions on drilling on the continental shelf are a good idea? I don’t have an objection to such drilling in principle, although NIMBYists everywhere will, and I do object to subsidizing it. Whether Democrats should change their position on such drilling, or on drilling in ANWR in response to public unhappiness about high gas prices? Probably not. No way is this a bigger plus for the Republicans than a number of large minuses they have going for them. So democrats hardly need to take the risk. In congressional or statewide races in coastal states candidates can break with the party if they need to. In the south and gulf states that would hardly be a surprise in any case. Or are you asking how I’d lower gas prices? Well since drilling won’t accomplish that, drilling isn’t my or any answer. But I don’t have a magic bullet that is.
 
Written By: Retief
URL: http://
In theory no change would happen if OPEC & Friends cut back from what they would have otherwise produced.
Except that OPEC countries will get a smaller slice of the pie if they cut back with no effect on price. Basically, expect the perfumed princes in the plush hotel lobbies of Geneva will agree to stiffened quotas and that nobody will adhere to them.

I have long found the "OPEC as price manipulator" argument to be pretty thin gruel given the widespread producer quota cheating that went on in the early ’80s eventually leading to periodic price dips below $1/gallon. The market fundamentals are different now but the same motivations to cheat exist and OPEC has no enforcement mechanism to speak of.
Eventually, oil acts as inelastically with respect to a overage as they do a shortage.

Much like now, people can only cut consumption to a point. They still have to drive to work, the schools, the store. They can cut out a some trips, optimize their driving patterns, but ultimately most of the miles driven today people will have to drive tomorrow. Moving their home, buying a more fuel efficient car don’t happen overnight.

When oil is cheaper, people aren’t going rush out to move further away from work, or rush out to buy a gas guzzler. They aren’t going to make an effort to consume much more.

Therefore a relatively small percentage of overage will crash the price of oil.

As a producter with the reality of more production from a fellow producer you have two choices

Keep producing @ 100% of the old production for 50% of the old price, or
Produce @ 90% of the old production for 100% of the old price.

As for the 80’s, the price of oil was kept low to keep Iran defunded. The Saudis crashed the price once the Iran-Iraq War was over.

Today, an indirect consequence of the Iraq War and War on Terror, the Saudi Security situation it looking great at the moment. We’ve removed Saddam. We are physically sandwiched between SA & Iran. We have ground down radical groups like AQ. We are also the focus of attention in the region for radicals as well.
 
Written By: jpm100
URL: http://

 
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