Tuesday, July 15, 2008

Drilling for lower prices

WASHINGTON (AP) - The White House says President Bush is planning to lift an executive ban on offshore oil drilling.

And not before time. Everybody hand-wringing about inflation should support this. As Walter Williams pointed out recently, as long as the U.S. Congress holds up the production from new and exiting fields, then prices will remain high, and the US Congress remains "OPEC's staunchest ally."

It won't even take drilling to start for prices to drop. As soon as the US Congress legalises offshore drilling, the expectation of future production will cause the the price of future oil to drop -- a drop that will feed through to present prices.

"We can't drill our way out" of the problem of high oil prices? You bet we can.

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6 Comments:

Anonymous Mo said...

I'm going to have to disagree with this view. Here is a snipe out of a NY article below:

"A lesser fiction, perpetrated by the oil companies and, to some extent, by misleading government figures, is that huge deposits of oil and gas on federal land have been closed off and industry has had one hand tied behind its back by environmentalists, Democrats and the offshore protections in place for 25 years.

The numbers suggest otherwise. Of the 36 billion barrels of oil believed to lie on federal land, mainly in the Rocky Mountain West and Alaska, almost two-thirds are accessible or will be after various land-use and environmental reviews. And of the 89 billion barrels of recoverable oil believed to lie offshore, the federal Mineral Management Service says fourth-fifths is open to industry, mostly in the Gulf of Mexico and Alaskan waters.

Clearly, the oil companies are not starved for resources. Further, they do not seem to be doing nearly as much as they could with the land to which they’ve already laid claim. Separate studies by the House Committee on Natural Resources and the Wilderness Society, a conservation group, show that roughly three-quarters of the 90 million-plus acres of federal land being leased by the oil companies onshore and off are not being used to produce energy. That is 68 million acres altogether, among them potentially highly productive leases in the Gulf of Mexico and Alaska."

also this link below:
http://edition.cnn.com/2008/TECH/science/07/08/pickens.plan/index.html#cnnSTCVideo

7/15/2008 04:26:00 pm  
Blogger Ruth said...

Peter if you believe this you really are a naive fellow. Big Oil are TERRIFIED of a price drop. There is no incentive to drill for oil as you suggest. They do not want lower prices.

Abu-Dhabi based airline Etihad has placed the world's largest order for US$43 billion dollars worth of aircraft.

That might give you some idea of the manipulation involved in the oil market.

7/15/2008 04:42:00 pm  
Anonymous LGM said...

Ruth

Not so. It is governments that are against the establishment of low prices. Governments do not like a wealthy independent citizenry. They prefer crisis, impoverishment and dependancy.

Oil companies like oil to get cheaper over the long run. For one thing it makes the entering the market more difficult for new competition. Low prices keep customers happy and allow sufficient profit. Oil companies do not like when their business becomes a political football with all and sundry weighing in with unfounded opinions, repeated myths and vile calls for legislation. Consumers are never well served by this sort of thing.

If lower prices is what government wanted, we'd have been buying petrol at the pump for $1/litre yesterday. there would have been a rush to remove the taxes on fuels.

Consider this. Who makes the most money out of oil? It isn't the oil companies.

LGM

7/15/2008 07:12:00 pm  
Blogger KG said...

"...almost two-thirds are accessible or will be after various land-use and environmental reviews."
If these areas are under land-use and environmental reviews, what basis is there for claiming that they "will" be available?

"Further, they do not seem to be doing nearly as much as they could with the land to which they’ve already laid claim."
We can ignore the Wilderness Society's claims here--they're directly opposed to drilling and exploration in any case.
"roughly three-quarters of the 90 million-plus acres of federal land being leased by the oil companies onshore and off are not being used to produce energy."
Because a large part of the leased land doesn't hold oil? Or perhaps it's in a form that's uneconomic to extract? Or both?
If I lease a million acres of land and find enough oil to pump from just one well, does that qualify the remaining 999,900 acres or so of land as "not being used to produce energy"?
"That is 68 million acres altogether, among them potentially highly productive leases in the Gulf of Mexico and Alaska."
Potentially means nothing--almost the whole of Australia is "potentially" productive, but the costs and difficulties of extracting oil and gas may well turn out to be prohibitive.
I'm not an expert and don't pretend to be, but I have a finely-honed bullshit detector--and it's twitching after reading your comment, Mo.

7/15/2008 07:48:00 pm  
Anonymous Mo said...

thanks for clearing that up. it seems the NY times is on the same view point below:

"President Bush’s decision on Monday to lift the moratorium on offshore oil drilling first imposed by his father 18 years ago is designed to ratchet up the pressure on Congress to do likewise. Congress should resist. Offshore drilling will not bring short-term relief from $4-a-gallon gasoline, nor can it play much more than a marginal role in any long-term strategy for energy independence. The oil companies already have access to substantial unexplored resources.

At issue are about 19 billion barrels that, the Interior Department says, lie in federal waters in the Gulf of Mexico and off the Atlantic and Pacific coasts. Until Monday, these waters had been protected by two parallel moratoriums.

One was an executive prohibition on offshore drilling in the Lower 48 states, imposed by the first President Bush in 1990 after the Exxon Valdez disaster. This moratorium was later extended by President Bill Clinton, who added protections for Alaska’s Bristol Bay, a rich fishing ground. Mr. Bush lifted the Bristol Bay protections last year and has now eliminated the rest.

Nothing can happen in these waters, however, unless Congress chooses not to extend its moratorium, first enacted in 1981. Under law, the moratorium must be renewed every year in the annual spending bill for the Interior Department. That bill is still in the committee stage in both houses of Congress. And while the environmental community (and anti-drilling governors like Arnold Schwarzenegger) are confident that a Democratic-controlled Congress will renew the prohibitions, nothing is certain in this new era of $4-a-gallon gasoline.

Congress should not give into the pressures of a restless public and a campaign by sacrificing long-term environmental protections for short-term political gain."

7/15/2008 11:36:00 pm  
Blogger Jeff Perren said...

"sacrificing long-term environmental protections"

That's the real reason in a nutshell, isn't it?

Never mind the price of gas, food, plastics, and everything else made from or using oil. Never mind the inalienable right of should-be free men to produce and profit from their efforts. Never mind the right of others to trade with them freely.

What is important is to 'protect' oil-rich waters 175 miles off the coast of Louisiana in the name of holy viro-paganism.xtuepc

7/16/2008 07:12:00 am  

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