Talk Radio and Oil

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.”


“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.

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