Oil Prices: How Drilling Offshore will do nothing to lower prices and how we got where we are today

Wow it didn't take long for Republicans to find a cheap ploy to use politically in their favor did it? And a lot of Americans seem to be buying it hook, line and sinker.

McCain and Bush went out of their way to push for offshore drilling making the argument that if there was more oil out there that prices would drop. There's two major flaws in that argument. But before we move forward, let's review how we got here and why prices are actually inflated:



Okay so now we see that the Enron Loophole create deregulation that basically allowed Energy Companies and Banks to own the market. They could use their influence in a corrupt way to fuel a speculation bubble and essentially they could buy the market into a higher profit zone. Great for them, horrible for us.

Luckily help is on the way. The Farm Bill that Keith references, McCain voted against and Bush vetoed, was passed thanks to a veto override in Congress. That means on September 30, 2009 the loophole closes and economists predict that gas/oil prices could be lowered as much as 25-50% overnight.

Finally a light at the end of the tunnel.

What about offshore drilling? Could that also help?

From The Seminal's Jason Rosenbaum:

Reason #1: Offshore Drilling Won't Increase Oil Supplies For 7-10 Years

That's right, even if we repeal all bans on drilling anywhere in the U.S., we won't see the benefits for almost a decade:

That's the estimate from the American Petroleum Institute, the oil industry trade group. Major environmental groups think the increased supply would be at least that distant before arrival, and say it mostly would benefit Big Oil.

"It would take a decade to bring new leases into production, and then they would only line the coffers of the oil industry," said Carl Pope, the Sierra Club's executive director.

Reason #2: Offshore Drilling Only Makes Financial Sense When Oil Prices Are High

Offshore drilling is expensive:

However, analysts on all sides agree that drilling faces political, regulatory and economic hurdles. Individual states could forbid it. If exploration were allowed, permits would have to be granted, and before that environmental concerns must be addressed. Drilling also would have to make economic sense: Offshore drilling is expensive, and the more remote the site, the more costly it is.

Therefore, offshore drilling would only make economic sense if the oil tapped could be sold at a high price. Once the price of oil drops (which it is unlikely to do, but let's think hypothetically), offshore drills lose money, they get shut down, and prices go up again. Offshore drilling will not solve our gas price problem.

Reason #3: There's Probably Not A Lot Of Oil Out There

Bush and McCain tout drilling as a way towards energy independence. It's not; it's only a very short-term fix. Once we get the drilling going (remember, 7-10 years), there isn't much oil to drill:

The Interior Department offered a wide range of estimates of how much oil might be within reach of U.S. offshore drilling in a 2006 report. It estimated that the Outer Continental Shelf could hold 115.4 billion barrels. However, it also estimated that recoverable reserves off U.S. coasts in areas now banned from production probably hold only about 19 billion barrels.

…

The world consumes about 86 million barrels a day. The U.S. share of that is about 20.6 million barrels, 60 percent of them from foreign sources.

One thousand million barrels equals 1 billion, so if there are 19 billion barrels in the areas McCain would open to drilling, that's enough to provide about 920 days, or about 2.5 years, of current U.S. consumption.

That's right. Drill in all the places you can't drill now and you get (gong!) a whopping 2.5 years worth of oil. And that's assuming consumption levels stay static, which they have never done.

Reason #4: Oh, And There Are No Ships To Carry That Oil

Even if you did build the wells (7-10 years), make it economically feasable to keep them open (that means high oil prices), and tap all that oil (only 2.5 years worth), you wouldn't be able to find a ship to drill the oil and ship it back to shore for use:

In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones. Slow growth in oil supplies, at a time of soaring demand, has been a major factor in the spike of oil and gasoline prices.

Mr. Bush called on Congress Wednesday to end a longstanding federal ban on offshore drilling and open the Arctic National Wildlife Refuge for oil exploration, arguing that the steps were needed to lower gasoline prices and bolster national security. But even as oil trades at more than $135 a barrel — up from $68 a year ago — the world’s existing drill-ships are booked solid for the next five years. Some oil companies have been forced to postpone exploration while waiting for a drilling rig, executives and analysts said.

You can even explore for new oil fields for 5 years due to lack of ships!

Jason's first four points are incredibly valid ones (his fifth point, that speculation is not making oil prices rise is a bit off although in fairness it's deregulation coupled with the speculation that these energy companies and banks are orchestrating in concert that has created this problem so to blame it solely on market speculators would be leaving a lot of this story out). As he mentioned drilling oil might be impossible because of the shortage of drilling ships.

There is no immediate gain to be had from drilling now.

In fact McCain's own advisor admitted as much:

But McCain’s message was contradicted yesterday by his top economic adviser, Douglas Holtz-Eakin, who told reporters that new offshore drilling wouldn’t help lower current gas prices:

Douglas Holtz-Eakin, a senior advisor to McCain’s campaign, acknowledged in a conference call to reporters that new offshore drilling would have no immediate effect on supplies or prices.

The Energy Information Administration says that new offshore drilling wouldn’t have “a significant impact” on gas prices until 2030.

By 2030 shouldn't we be well on our way to alternative energy? There's pretty much no excuse if by that time we're not using solar and wind energy pretty close to exclusively.

Rp

Obama's Nomination Clinching Victory Speech

Here is Obama's amazing speech from last night. I truly thought it was one of his best.

And now onto the General Election....

A couple things about last night...

I honestly have always tried to be an alarmist about this election. I think it was my normal reaction to being an optimist the last two times and to have the excruciating experience of having both of those campaigns, campaigns for which I worked hard for, stolen away.

I don't think it's necessarily a horrible thing to play Chicken Little when the Republicans are so willing to lie, cheat and steal as necessary to retain power. It is fact that most of the electronic voting machines have strong Republican ties. It is also fact that the Corporate Media also has such ties and have been defensive of even the most horrendous Bush policies since 2001.

That being said, this time around our eyes should be open and the tinfoil hats should be ready to wear because there are going to be instances in which it will not be "conspiracy theory" to suggest off the wall insanely illegal strategies or plans that the Republicans might use.

As the movie Recount showed, Republicans just play to win, plain and simple. They have no level of ethics to stand up to. Whatever it takes.

As Democrats we have always held ourselves to a higher standard and in the past eight years, aside from the 2006 midterms that kind of thinking hurt us.

This time around I expect no less than the smearing Kerry received. They'll use every Hillary talking point against Obama (they already are by posting this video on Youtube)... dragging race, inexperience, his church into the fray and not caring one bit about it.

With that being said I happened to attend the Obama Primary Watching Party last night in Cudahy. It was without a doubt a historic night.

Historic for two reasons. One for the first time in my lifetime we have an African American General Election Nominee from one of the major parties.

WTMJ Channel 4 in Milwaukee asked me about that and I gave them this quote:

“It was something I wasn’t sure we were going to achieve in my lifetime and it’s kind of sad that we had that feeling," said Robert Poole. "But today kind of alleviates a lot of those fears.”

If you click the video button on that link above and skip past the parts of Obama and Clinton's speeches you'll see me saying that on there as well.

The other reason this is historic is that it marks the end of the DLC.

Al From's Democratic Leadership Committee as lamented and commented on here before, is the Corporate Wing of the Democratic Party. They have leaned far away from social programs in favor of Corporate Welfare. They push candidates that are considered "centrist" but mostly they just want candidates that are easy to control. They've been running candidates out there that are practically indistinguishable from our Republican opponents and in turn it helped in shifting the political spectrum to the Right. With Democrats leaning so heavily on Pro-Corporate, Pro-Republican values, the Republican party had to lean to the Right to differentiate themselves. Lucky for them Dick Cheney was around to make that transition easy.

The problem is that aside from giving away the Democratic identity of being a party for the people while Republicans were the party of the rich and corporate elite, this ran candidates unwilling to show any spine and stop corruption in Congress. It made Democrats enablers to Bush's multiple Constitutional Crimes and most certain War Crimes.

And it lost elections... lost them big.

The Clintons were at the forefront of the groups creation, the standard bearers for what the DLC wanted the party to look like. It was many of the Clinton's campaign staff and White House advisors that formed leadership in the group and provided direction for it's candidates.

They were the epitome of DLC. And now they've lost their last chance at the White House. Hillary might not be willing to concede or accept it at this point but that is reality.

So the cancer of the Democratic Party has now had it's standard bearer be defeated and a new breed of Democrat who once again wants the party to stand up for the poor and middle class and who wants to change the culture in Washington has stood up and pushed the DLC over the proverbial cliff. I wonder how they will take it.

Onto the General Election and onto John McCain. Believe me, it's about time because that guy has had a free pass for way too long.

-Rp

Even though this FL/MI mess is over Hillary has seriously damaged us (and will continue to)

We all know Florida and Michigan broke the rules when they tried to jump ahead. We also all know that Hillary and Obama knew that neither primary would count when they signed the pledge not to campaign.

So you had to know that in either case the best the DNC would do is reduce delegates or negate the results of those primaries in some way, months ago. This is not new news.

Both campaigns expected as much when they signed that pledge.

The problem is when Hillary's coronation was disrupted and it was clear they were going to lose this election her campaign went back on that pledge and decided to pull out the kitchen sink/scorched earth tactics.

They played up the Rev. Wright issue in the media and kept it going for two months. She hinted that Obama was a "muslim" with the off handed "as far as I know" comment. She hinted at McCain being better qualified to be President than Obama. And her campaign played the race card heavy and often with Pennylvania, Indiana, West Virginia and Kentucky by openly courting White voters and presenting themselves as the safe white choice.

All of that certainly damaged Obama no doubt and all of it will continue to be exploited by the Republicans who have none of the scruples we once thought Democrats to have (once again, thanks Hillary).

But with her constant complaining and creating controversy where there was little to be had about two states, states that were already not gimmies for the Democratic Nominee in the Fall as it is, she played the worst possible card.

Her campaign knew going in that neither primary would or should really count. She clung to them out of desperation.

And even though the RNC halved the delegations for both states, nobody really knows about it nor cares.

After all the Republicans never went on TV railing against Democrats or their National Committee in saying Democrats don't want to count your votes.

Essentially she threw the entire Democratic Party under the bus in those states. The perception she created makes it appear that the Democrats don't care about voters from those states.

The Republicans had equally damaging penalties for these states but Hillary making a case against Democrats and the Democratic Party as a whole has made it seem that the Democrats are the party who doesn't care about Florida or Michigan.

I admit getting Florida was a long shot but Michigan was a winnable swing state that now will be much harder for us to win.

And why? Because Hillary's loyalty is to herself and not to her party.

Hillary's campaign came into these meetings, knowing that she signed a non-compete pledge and that Democrats were aware that neither primary was legitimate and they still came in with the unreal expectation of full delegate seating based on those disqualified primary results. Results, that included a state where Obama and Edwards were not even on the ballot. Results where Obama could not come to the state and campaign against her name recognition and in every state thusfar he has either whittled down her support or overtaken her in primaries where they both spent time in a state.

They would not accept any less and I honestly don't think she cared how it turned out. Delegate-wise their best hopes would not have put them over the top and they knew it. Their best shot was to keep popular vote numbers (most especially problematic in Michigan where she had her name on the ballot and Obama did not) so she could take it to the Convention and argue a popular vote victory.

This was all angling and posturing for the fight they knew they were going to make in Denver.

No result today would have changed their intentions. This is not about Michigan or Florida's voting rights. This is and has always been about Hillary Clinton.

So she'll head to Denver and begin a party war on the floor. She'll have all of her big money donors call and threaten to rescind campaign financial support to Superdelegates who run in State races or House races and unlike a National Presidential candidate do not have the visibility or power to inspire thousands of $20-50 donations from constituents... certainly not enough to compete with the big Republican donor rolls.

These superdelegates will face their own political mortality if they lose donors to their campaigns and possibly see these fatcats work against them for a primary opponent who will support who they want next time out or even a Republican who have proven easier to control by their financial backers.

It will be the dirtiest game ever.

And Democrats will look sleazy, to millions of viewers nationally who are sick of the culture of corruption in Washington and will have a hard time understanding how any Democrat would be a change when it appears to run so rampant in their own party.

Fatcats and lobbyists calling the shots for their old pals the Clintons.

And in the end we'll limp along severely damaged because Hillary can't just quit and go away. Doing what is best for her party isn't in her bloodstream it appears.

The convention will turn off millions of voters.

The cries of "Democrats don't care about your votes" will turn Michigan and Florida voters away from our party in November.

It's not all gloom and doom. We have the one candidate that can shine hope onto any situation. But she has continually attempted tie both hands and a leg behind his back in November.

It's not the Democratic Party that doesn't care about Michigan and Florida voters... it's Hillary Clinton.

Because if she really cared about them, she would have stopped turning them away from the party and bowed out in a way that would help our nominee win this November. Without that, none of those Michigan or Florida voters will have a chance this next four years.

Because four more years of Bush policy is enough to ruin us all.