Hoping to ride on a populist wave, the GOP has seized the public’s support for expanded offshore drilling (as shown in polls), and tried to frame the Democratic Congress as a bunch of do-nothings that idly sit while average Americans are suffering record gas prices. The GOP’s rhetoric is that “something needs to be done” in order to show the public that Congress cares.
Let me just say this: “something needs to be done” is possibly one of the worst rationales for doing something. Just because the public is clamoring for something doesn’t mean that that “something” is a particularly good idea, especially for something as complicated as energy pricing in a global market.
Let’s examine why all this rah-rah about expanding offshore drilling is not likely to reduce gas prices for ordinary American consumers in the forseeable future. And in a twist, I am going to use the oil industry’s own words as the basis of my argument.
In a letter to Congress (PDF) written by Red Cavaney, President and CEO of the American Petroleum Institute (“the only national trade association that represents all aspects of America’s oil and natural gas industry“) on June 26, 2008, Cavaney writes:
“Crude oil prices remained above $130 a barrel last week, keeping the price of a gallon of crude oil – the raw material used to make gasoline, diesel, and other fuels – well above $3.00. Rising world demand, lagging growth in supply, and tight spare production capacity are the main drivers of these increases.”
If “rising world demand, lagging growth in supply, and tight spare production capacity” are the reasons the oil industry attributes to the rising cost of gas, then at most, expanding offshore drilling will address only one of them: namely, lagging growth in supply. By itself, expanding offshore drilling will not address increasing global demand or tight spare production capacity (i.e., lack of refineries).
Now, how will expanding offshore drilling resolve this issue? According to Mr. Cavaney:
“As a nation, we can have more control over our energy destiny by supplying more of the oil and natural gas we’ll be consuming from resources here at home. Government policy now stands in the way of that. However, polls show that a rising majority of Americans want expansion of access to federal oil and gas resources now off limits…”
Yet if “rising world (emphasis mine) demand” is one of the key drivers of rising gas prices, then an increase in supply only addresses world demand, not uniquely American demand. And this still does not address the other factor that Cavaney mentions–lack of spare production capacity.
Now, there is also the problem of timing: how long does it take to bring crude oil to market? According to Mr. Cavaney:
“And if a company is successful, years more are spent in the work required to bring the resources to market.”
So if it takes years to bring the crude oil to market, and you combine that with the lack of spare production capacity, you are looking at a very long time before the crude oil is brought to market, in order to meet a global demand, with no guarantee that the oil goes back into the American market.
And what does the oil industry hope to accomplish? Once again Mr. Cavaney comes to the rescue:
“…to enhance our nation’s energy security, create more American jobs, and keep more dollars at home in the American economy.”
Notice how none of those goals include REDUCING GAS PRICES for the ordinary American consumer–and after all, isn’t that what the political rhetoric is all about?
But should anyone be surprised that reducing gas prices for the ordinary American is not one of the oil industry’s objectives? Why should the industry want that? After all, Exxon-Mobile just reported the most profit earned in a quarter by any corporation, EVER.
So please, for the “concerned lawmakers” out there, save us the fucking rhetoric. Energy pricing in a global market is way too complicated for someone from Kansas alone to address. All this talk may play to the base, and God knows it’s an election year, but if the base is hopelessly retarded and knows nothing about how global economics work, then stop stooping to its stupidity.
Just because something can be done doesn’t mean that you should fucking do it.
But like Roger Waters once sang: the show must go on, so here’s to the circus act that is Congress in an election year.