It's brilliant because it highlights the absurd fallacy: that opening up more land for drilling would lower gas prices. The fact is, oil companies already have leases that they are sitting on, not drilling on.
Opening up more land for oil leases will not cause them to drill more oil. It'd be like putting more gas in the tank of a driverless car. Putting more gas in the tank will not enable the car to go farther. The car will go nowhere, because no one is driving it.
Bush's response was predicable. It's one of those comments that is either stupid, or a blatant lie:
White House threatens to veto oil drilling legislation
"By blocking some firms from competing for new leases, this legislation would further increase gasoline prices that already exceed $4 per gallon and result in unintended consequences due to litigation," the White House said in a statement.
No no no. As incredible as it may seem, the President sometimes does lie.
The reason oil companies are trying to lock up leases, is that doing so will enable them to control the supply of oil. If permitted, that action would increase prices, not decrease them. Big companies with deep pockets can buy the leases and sit on them. This prevents competition.
This is explained by Naomi Klein, in an interview with Amy Goodman:
I just want to add one more point, and I just want to take this opportunity, because I feel like people are being so bombarded with these oil industry talking points, and it really is changing public opinion. I mean, people need to know this. There's--polls are being commissioned that are finding that 67 percent of Americans support offshore oil drilling, because they think it's going to lower the price at the pump.
What's actually going on is the oil companies may not even bother drilling. What they're doing is they're stockpiling leases. And what that means is that the oil companies will have a much greater control over the oil supply. When the oil companies have a much larger control over the oil supply, they can turn it on and off. They can control price. They can fix the price. So, in fact, what this is doing is the opposite of what they're saying. It's actually giving the oil industry much more power to drive the price of oil up by controlling supply, by just giving them all of these leases. And we keep hearing, well, they have all these leases already, and they're not using them, and they want more. Why? Why do they want all these leases? Because that is what gives them control over supply. That's what allows them to fix prices.
This tactic would be prevented by a use-it-or-lose-it leasing policy. What would make sense, is for the companies to have to pay for the lease. If they can't show progress, then the lease expires and we keep the money.
The use-it-or-lose-it policy would not "block some firms from competing." On the contrary: it would make it more difficult for large firms to corner the market.
We will hear things like: 'if the oil companies are allowed to drill offshore and in ANWR, then they could produce more and bring prices down.' That happens to be true, as far as it goes. They could produce more, and they could bring prices down. Sure, they could, but would they? They are the greediest bastards on the face of the earth. Why would we expect them to be benevolent?
So, the use-it-or-lose-it policy is brilliant. Thoughtful people will think about it, and realize what the game is.
Now, the second part -- the part about prohibiting export of Alaskan oil -- is pointless. It would do nothing to alter the supply-demand equation. If there is less oil available outside the US, then foreign oil will be more expensive. Perhaps we would pay less for the Alaskan oil (although that is not assured), but we would pay more for the oil we import. So there would be no net gain. All we would do is irritate our neighbors. Plus, we would risk setting off a wave of unhelpful protectionism. It may come to that eventually, but there is nothing to be gained by doing it now.
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I also find it interesting that no one is talking about whether doing more offshore drilling or drilling in ANWR would actually have any effect on anything. I suspect that the amount of oil we could actually get by doing that is relatively minor. It would probably not affect prices all that much--just as adding one farmer growing half an acre of corn would not do anything to lower corn prices.
Posted by: Dr. Kate | July 18, 2008 8:16 AM
There is also the fact that those in support of drilling never mention the time line of 5 to 7 years minimum before that oil hits the market. They are deliberately misleading the public into believing that it will bring the price down immediately.
Posted by: Doug Alder | July 18, 2008 8:59 AM
A "time line of 5 to 7 years minimum before that oil hits the market" provided they had the rigs to start drilling now. There might be a similar waiting period until they could lay their hands on a rig that isn't already booked. rb
Posted by: arby | July 18, 2008 10:31 AM
Emptying ANWR now, when oil is moderately pricy, means it will be gone in the future when oil is much more valuable. Better to import oil foolishly extracted and offered for sale by foreigners, and save your own national treasure.
Notice I speak only of energy security considerations, saying nothing of global warming prevention, according to which the time to take a reservoir of fossil carbon out of the ground and add it to the air is "never". I don't think anyone is listening: every politician on Earth is conspiring to empty fossil ground stores into the atmosphere as fast as possible, making humbug of their "green" talk. Gordon Brown, in the UK, is calling for ways to pull the last gasps of methane out of the North Sea, and is in talks with Nigeria on how we can support their society against civil unrest, the better to empty West Africa's stock into the sky.
Posted by: derek | July 18, 2008 1:03 PM
I have a question. I definitely would support a strategy that would lower gas prices, but I want to ask -- are the leases that these companies are sitting on economical to develop? That is, would the resulting drop in oil price result in oil dropping low enough that those fields actually operate at a loss? Or would it just be reduced profits?
I honestly doubt that the oil companies aren't sitting on land that *could* be developed economically and just not developing it. I only ask because someone else raised the question and a cursory search doesn't turn up anyone who addresses it specifically.
(Unrelated -- how do you set yourself to get alerts/RSS for COMMENTS on this board!)
Posted by: GAC | July 26, 2008 3:48 PM