Friday, August 08, 2008

Oil Arguments

To drill, or not to drill, that is the question that preoccupies us....

Okay, I left a few Pounds at Shakspeare's birthplace not long ago so I claim the right to parody the Bard. It seems at this point in time that our enemy McCain is drubbing our friend Obama on the question of whether to drill remaining domestic oil reserves. On the surface (about the deepest most Americans go), it seems like a great idea. I mean, if we're getting it from off the coast of Florida, it's domestic, right? It's ours, right? We own it and we should be using it, right?

Well, to say that drilling Alaska and Florida would increase domestic supplies is correct, somewhat. To claim we would benefit disproportionately from it belies either an ignorance of world oil markets or a will to mislead. Or both.

Oil is sold on a world market. Crude currently delivered from oilfields in Alaska or Texas or Colorado costs just as much as crude delivered from the Middle East (again misleading - we get only a small fraction of our oil from the Middle East). What would happen if you could magically increase production of Prudhoe Bay? Would American gas prices suddenly decrease vastly due to the increase in domestic supply?

No. Some of the oil that was currently being delivered to the US could now go to pollute the Olympic air over Beijing or to accelerate climate change but the price of oil would not change appreciably. Oil is traded on a world market. Prices depend on world supply and demand, hence a hurricane in the Gulf of Mexico raises prices in Europe although their supplies are not affected. On the supply side, increasing production through drilling more oil would simply make more world supply available, lowering prices in China and leading to more inefficient use of it in US SUVs. The company who wins the bid for the field owns the oil. They will sell it to the refiner who bids highest, be they in Houston or Hamburg. And we will see little to no benefit from the increased oil production since by the time the wells would come into production, demand would have increased more than enough to offset the increased supply.

Some day we will drill the ANWAR. Some day the oil fields off Florida will be exploited. We have to face the inevitability of that. Our goal should not be to protect the fields at all cost but, as Obama has suggested, to use the fields as bargaining power to get what we want. When Obama proposes allowing drilling as a part of a comprehensive energy package, he's being smart. Unfortunately not many of his countrymen appreciate reasoning these days or McCain would be running about the same numbers as Bush's popularity.

A bit more (truth, in short suply these days) about the dreaded tire gauge (should be measuring the pressure on McCain's Brain):

From Popular Mechanics:

The average consumer could improve gas mileage by 3.3 percent by simply keeping his tires inflated to the proper pressure. For the average driver in the U.S. and his 15-gal. fuel tank, that's a savings of about $2.00 on every fill-up. Figure in the increased tire life from those correct pressures, and this is beginning to add up to a handy sum. Of course, if you—or your mechanic—have been diligent about keeping tire pressures set correctly, you won't save anything, which sounds like rewarding lazy people and penalizing the careful ones to me. But that's life....

According to the Department of Energy, underinflated tires alone cost the country more than 1.25 billion gal. of gasoline annually—roughly 1 percent of the total consumption of 142 billion gal. According to the Annual Energy Outlook 2007, published by the Energy Information Administration, offshore drilling would increase domestic production of crude oil by only about 1 percent.

We opened this discussion with Sen. Obama's assertion that we can offset the need to reopen offshore drilling—and save money at the pump—by keeping our tires inflated properly. He's right

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