I’ve been listening to conservative talk radio here in the valley for the last week, if for no other reason than my own morbid curiosity. But I have to admit, it’s really fascinating. It’s amazing how well republican talking points are spread, and how well they make ridiculous right wing positions sound like common sense.
This week they’ve jumped right on Bush’s bandwagon: blaming Democrats for high oil prices because they won’t allow drilling.
While is patently ridiculous, you have to admire the brass balls on these guys. It’s hasn’t been our disastrous economic, energy, or foreign policy positions that raised the price at the pump, it’s those pesky democrats and tree huggers. Never mind the fact that for the first 6 years of my presidency I had a rubber-stamp congress who did anything I told them to do. Somehow those democrats hate cheap gas, and it’s all their fault.
There’s no discussion of the fact that part of the drilling moratorium was actually passed by his father when he was president. Every concern about why we shouldn’t drill is blown off as inconsequential in the face of $4/gal gas.
This station at least is riding a hard line message which is “more oil in the market = lower prices”. It’s just basic economics! Everyone knows that all prices are set by supply and demand!
It goes without saying that there is no actual discussion of how oil economics actually works. When they state that there’s BILLIONS! of barrels of oil out there to be had, there’s no discussion of how much that is relative to world supply (which would be important to know in a pure supply and demand discussion). Just for giggles I thought I would look up how much oil ANWR has and how much it would affect prices. Off to wikipedia!
From the Energy Information Administration:
“The opening of the ANWR 1002 Area to oil and natural gas development is projected to increase domestic crude oil production starting in 2018. In the mean ANWR oil resource case, additional oil production resulting from the opening of ANWR reaches 780,000 barrels per day in 2027 and then declines to 710,000 barrels per day in 2030. In the low and high ANWR oil resource cases, additional oil production resulting from the opening of ANWR peaks in 2028 at 510,000 and 1.45 million barrels per day, respectively. Between 2018 and 2030, cumulative additional oil production is 2.6 billion barrels for the mean oil resource case, while the low and high resource cases project a cumulative additional oil production of 1.9 and 4.3 billion barrels, respectively.”
And
“Additional oil production resulting from the opening of ANWR would be only a small portion of total world oil production, and would likely be offset in part by somewhat lower production outside the United States. The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027 for the high oil resource case, relative to the reference case.”
That’s right kids, a whopping reduction of 75 CENTS on a BARREL of oil, not a gallon of gas, in 2025. With prices at $137 right now, that 75 cents should really help us save at the pump in 17 years. Also take note that there would be no increase in production for 10 years. 10. Years. Yep.
It’s important to note that total US reserves (21 billion barrels) represent only 1.8% of total world reserves. Saudi Arabia alone has more than 10 times the amount of reserves that we do. Increased drilling is not going to lower prices. At least not in the US.
It’s also important to note that any increased production in the US can easily be offset by reduced production overseas which will keep prices stable.
“But Joe,” you say, “those numbers don’t include oil shale, which the US has a shit ton of.” This is very true. Back to the interwebs! Turns out that the US may command roughly 1.7 trillion barrels of shale oil! Whee!! awesome. That will totally solve the problem!
Except it won’t. The cost of producing shale oil, before taxes and markup is between $70-95 a barrel.. To give you an idea of how big an issue that is, it currently costs around $7 a barrel for regular oil drilling in the US.
While shale oil may provide another huge source of hydrocarbon energy, it’s not going to lower prices at the pump without massive technology leaps driving down production costs. That will not be happening this summer, or the next one, or the next one. Maybe when your kids are your age though.
If supply problems really are the cause of high prices, US production is not going to fix it, because we just don’t have enough to make a dent. If you could get OPEC to produce more, you may have a solution, but Bush has been unsuccessful in persuading his buddies in Saudi Arabia to do so. Why? Because they don’t think it’s a supply problem!
So the question is, who stands to gain from bullshitting the american people about gas prices? Well, for one, the oil companies. They do in fact want to increase domestic production so they can capitalize on high oil prices, not because they want to drive prices down. After all, why should middle easterners enjoy all those insane profits? Lets get while the getting is good!
Who else benefits? Well, as I stated before, the republican party gets to hang high oil prices around the necks of democrats who oppose drilling, when it has nothing to do with the problem. A great topic for an election year. Also, they know if they can push a democratic candidate into actually explaining the reasons for opposing drilling, they can then paint them as an ivory tower intellectual who doesn’t understand the pain of the working class.
And of course YOU! It’s not a demand problem, it’s a supply problem. You should be able to drive that 7MPG hummer coast to coast and not feel bad about it. You really do need that 3.2 ton vehicle to drive yourself back and forth from your McMansion.
Of course, the republicans aren’t suggesting that we rethink how we design cities to encourage more foot traffic and biking. No suggestions of tax breaks for people who carpool to work. No spending bills for establishing excellent and cheap public transportation in every major city. It’s not a demand problem, it’s a supply problem.
While I do think that regulation is going to be a big big help in short term prices, it remains a fact that the US consumes something like 3 times the amount of energy it produces. It buys this energy on the world market, and will always be competing with other large industrial societies for scarce resources. Coal, Oil, Oil Shale, Oil Sands, all of our current hydrocarbon sources will eventually run out, and prices will go up.
We need long term sustainable sources of energy and we need them yesterday. We need to throw serious minds and dollars at hydrogen and solar in a big big way. The universe has a lot of hydrogen, and a lot of nuclear energy coming from stars. Harnessing these two sources would provide energy for a long long time.
7 comments so far...
Amen.
Joe,
Think about the logic of the left. While all the reserves that are off limits don’t seem like a lot in terms of world production. However, they would likely represent up 10-20% of the US requirements. And this would be significant. The US currently consumes 25% of world production. This would also be a strategic movie toward energy independence and let the world know that we are not afraid to work our reserves. As much I hate to say it, we need high energy prices to move us to alternative sources by bringing down the NIMBY syndrome. They now wake nuclear reactors that are failsafe from a meltdown standpoint. Waste is another issue but they now have a process that turns the waste into glass with shielding capable maintaining integrity for .5 million years. I really feel the left won’t be happy until we become a third world country. Think he the Kennedys have pushed to halt the wind farms of Nantuckit. The left is all about controlling the little people and don’t want the rules apply to the. True leaders lead by example; think Ghandy(?), then compare him to Al gore who uses over 19% more energy than the average family. Anyway, always look at the money trail. Just sitting around in the hospital and felt like ranting a bit. Nothing serious, just a headache clinic Michigan. As always Mr. Phelps feel free to delete this message.
P.S. Approximately 380,000 oil futures trade daily on the commodity markets. Only 30,000 are actually closed at the end of the month for real crude oil delivery. The rest are used to bid up the price of the oil actually delivered. Could be oil companies but most of it is finacial institutions trying to bale their butt out of the housing crisis. Love you, Dad
Still haven’t got the hang of typing on the iPhone. Hope all typos don’t goof up the message too badly.
While US production could increase to meet 10% of current US demand, that won’t bring the price of oil down in the US unless it’s not traded on the international market.
And I’m sorry, but who cares if the US is willing to work its oil reserves? That would probably mean something if we had 300 billion barrels sitting in the ground, but we don’t. We have no leverage here to drive down prices.
I don’t think the left wants to turn america into a third world county, but I think the majority of the left understands that this isn’t a problem that developed quickly and it’s not a problem that has quick fixes. As a country, both left and right have known about and lived in denial of the day this would come. The early seventies clearly exposed how vulnerable our economy is to changes in the foreign oil supply and both sides have done little to nothing meaningful to change it. Now it’s in our faces and everyone is in a panic and pointing fingers. Bah.
I’m actually with you on nuclear, but that’s a huge public relations battle that needs to be fought, and the nuclear industry really has to take ownership of the issue and explain in clear terms why nuclear is a safe option. All people know is that they said it would be safe before too, and that the government is trying to carve out mountains to store our radioactive waste. And everyone is quite clear about our nation’s record in containing hazardous waste. I think there are only 2 real ways to counteract people’s fears. Either bury the plants well below the watertable, or put them in orbit. Both are crazy expensive, but that’s what years and years of lying to people about safety does for you. We can’t even build a rupture proof oil tanker.
But if we’re going to pursue nuclear, let’s throw some serious money into fusion research. Screw fission. Fusion is incredibly clean once you’ve figured out how to sequester the tritium, can’t melt down, and the waste (only the reactor itself) is only dangerous for about 100 years. Plus if we fuse deuterium, we have a 150 billion year energy supply at current world consumption.
I share your concern for liberal nanny-statism. I hate ubiquitous cameras that don’t prevent crime. I hate FISA legislation that allows for blanket surveillance. But the left has no monopoly on wanting to control and manipulate the populace.
I think it’s fair to call Al Gore out on his energy consumption, but if you’re going to do it, also acknowledge that he pays more for energy that’s generated from renewable resources and purchases carbon offsets to minimize environmental impact. While he uses more energy, his home serves as a working office for both him and tipper, which has to serve staff, which arguably consumes less energy than establishing a separate building for the purpose. I would also argue that what Al Gore accomplishes with his energy consumption far outpaces what the average american household does.
I should actually make this clear:
I advocate for increased energy consumption. I totally buy into the idea of the Kardashev Scale, and believe that energy consumption is a reliable indicator of technological advancement.
However I am a strong advocate for energy efficiency as well. The amount of waste heat that we generate from almost all current technology is just crazy. High heat superconductors will help with this, as will moving to better locomotive technologies.
I’m also a huge advocate for renewable energy sources, or more to the point, to energy agnosticism. We should be able to harness a wide variety of energy sources with limited to no environmental impact. The first law of thermodynamics dictates that we’re really only ever changing the form of energy to get our work done, but we need to have an incredible amount of flexibility in our energy systems to recapture and reuse energy in all the forms that we transmute it. We’re pathetically limited in this regard currently.
Oh yeah, and again, I really don’t think oil companies are manipulating the markets. They’re certainly gaining from it, but given that oil companies have long kept prices stable, I see little reason to suspect they have changed their pricing philosophies. That includes both nationalized companies and independents.
The same people who are arguing that speculation isn’t the cause of high prices are the same people who argued that there wasn’t a housing bubble being driven by rampant price speculation and outright fraud.
While it’s true that there’s little hard evidence to prove it, that’s because almost all of this market manipulation happens behind closed doors with essentially no oversight. Exactly the same scenario as Enron.
So I’m in 100% agreement with you there.
Hi Joe,
I was wandering around the Web today when I found this post, and I thought you might be interested in some information about the current energy crunch. Here at The Wilderness Society, we’ve been compiling quite a lot of information that you might find useful for a future post. Hopefully we can talk a little more about the opportunities via email. I’m looking forward to hearing from you.
In the meantime, you might want to check out a couple links: http://www.wilderness.org/gasprices/ http://wilderness.org/Library/Documents/upload/ExpertsOnOilPrices.pdf
Best, Andy
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