Debunking Democrats on Drilling

[Herb Schaffler]

Debunking Democrats on Drilling
Steven Milloy
Augsut 28, 2008

House Speaker Nancy Pelosi last Tuesday dismissively referred to pro-oil-drilling demonstrators chanting “Drill here! Drill now!” as the “2-cents-in-10-years-crowd.” She may have to revise her insult strategy, since it seems that some mere pro-drilling posturing by President Bush has already helped reduce the price of gas.
The “2-cents-in-10-years” slam refers to the anti-drilling environmentalists’ primary argument that even if we expanded domestic oil production, it would have only a marginal impact on gasoline prices far into the future.
Increased worldwide oil demand, a weak dollar and increased oil futures speculation are among the leading factors that have caused crude oil prices to rocket upward since last summer, reaching a peak of about $136 per barrel in mid-July. Since then, the price of oil has backed off to about $110 per barrel, a decline of almost 20 percent. Gasoline prices have also fallen from mid-July’s national average of $4.11 per gallon to late-August’s $3.73 — a decline of more than 9 percent.
Why have the prices of oil and gasoline declined so much since mid-July? It’s hard to know for sure, but let’s consider the factors that caused the price to spike in the first place.
Americans, who drive about 3 trillion miles per year, do seem to be driving less and reducing demand for gasoline, according to the latest figures from the Federal Highway Administration.
Americans drove 4.7 percent fewer miles in June 2008 than June 2007, and 53.7 billion fewer miles between November 2007 to June 2008 than over the same period a year earlier — a time when gasoline prices rose from $3.06 to $4.13. So if less driving leads to lower oil and gas prices, the data don’t show that relationship.
How about the dollar’s 8 percent rally against the Euro since mid-July? Historically, the relationship between the dollar and the Euro has been only weakly correlated with the price of oil. That is, higher-dollar/lower-Euro and lower-dollar/higher-Euro movements have correlated only about 20 percent of the time with decreases and increases, respectively, in the price of oil. Recently, however, this correlation has increased to 57 percent, indicating “a reasonably high level of common movement,” according to David Gaffen, who writes the [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. . So it is possible that the dollar’s rise against the Euro may have helped reduce oil prices somewhat — but to what extent is unclear.
The remaining factor is oil futures speculation — which can be gauged by so-called “open interest” in crude oil, the number of futures contracts open on a given day. Since mid-July, crude oil open interest has declined by 100,000 contracts, a sign of heavy liquidation, the president of an energy risk management firm recently told the Associated Press.
So what happened in mid-July to cause oil speculators to bail out of oil? Could it have been Bush’s July 14 announcement that he was lifting the 1990 executive order barring the Department of Interior from issuing leasing rights to explore and drill for oil offshore? If Bush’s announcement was the trigger — and there doesn’t appear to be any other significant event during that time that might have caused speculators to rethink their positions — then it’s all the more remarkable since Bush’s action itself will not lead to more drilling or a major infusion of new supply.
Not only is there a separate moratorium on offshore drilling that Congress renews every year — and, so far, the Democrat-controlled Congress has given little indication that it is seriously considering lifting it — but there’s “only” an estimated 18 billion barrels of oil in the offshore areas subject to the leasing prohibitions. At current consumption rates of 7.5 billion barrels of oil annually, that’s less than a three-year supply of oil for the U.S.
Getting back to Pelosi’s derogatory “2-cents-in-10-years-crowd” comment, it seems as if it was debunked before she uttered it. Bush’s revocation of the executive order — which without similar congressional action amounts to little more than a political statement in favor of increasing the oil supply — has possibly already reduced the price of gasoline by 38 cents in 30 days.
The mere prospect that the U.S. might get serious about increasing the supply of oil has sent speculators scurrying for cover. Imagine what would happen if we actually explored, drilled and produced some of that offshore oil — which, by the way, could be way more than 18 billion barrels. The U.S. Minerals Management Service estimated in 2006 that the quantity of undiscovered technically recoverable oil in the outer continental shelf is between 66.6 to 115.3 billion barrels of oil.
In any event, even if the offshore drilling only reduced the price of oil 2 cents over 10 years, as Pelosi would have us believe, isn’t that better than the alternative her no-drill policy offers — ever-increasing prices?
As reported by Politico.com, Pelosi’s retort to the protesters’ chant was, “Right here? Can we drill your brains?” House Majority Leader Steny Hoyer then chided the protesters that “sophomoric chanting” won’t solve the energy crisis. That may be true as long as we allow petulant Democrats to run Congress and our energy future.

Steven Milloy publishes [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. . He is a[LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. , and [LINK POSTED BY MEMBER] Only Members Can View This No Hillary For President Forum Link. and an adjunct scholar at the Competitive Enterprise Institute.

[nohil-billy]

What riles me the most is the Democrats refusal to acknowledge that the only reason that it takes ten years to start production from a new well is because of all of the federal regulation placed on the oil companies by the Democrats.

[hrdman2luv]

Originally Posted by nohil-billy

What riles me the most is the Democrats refusal to acknowledge that the only reason that it takes ten years to start production from a new well is because of all of the federal regulation placed on the oil companies by the Democrats.

Have you forgotten that it was a Republican President, Richard Nixon who inacted the EPA? But that doesn't matter. I just thought I'd throw that in there because you were blaming something on the Democrats. Not that I take up for them, just that you don't seem to realize the similarities between the two parties.

But back to oil. It wouldn't matter if they found 1 trillion barrels of oil, 25ft. deep anywhere in the USA. Because it would still be the oil companies. And they would still price it on the world market and sell it to us at top dollar.

Congress doesn't want to challenge the oil companies. Fact is, they have reduced restrictions and prices haven't came down. They have went up steadily.
But the Democrats and Republicans want to to believe just what your believing. So you don't figure out the truth.
But that's OK. If you want to have someone to blame, both Democrats and Republicans have plenty of fingers to point. (at least the ones their not using to fill their pockets with lobbyist money from the oil companies to keep doing what they are doing.
Because what they are doing is nothing to hurt the oil companies.

[nohil-billy]

Did you know H2L that welfare was originally intended for women whose husbands died or divorced them? Look what a mess that turned into but it was hardly the fault of it's creator.

That's the way the oil market works. Supply and demand. If we found a trillion barrels and started pulling it out of the ground, we could better control supply and wouldn't have to beg OPEC to increase output. As for the price, the oil companies don't set the bbl price of crude. They simply purchase it, ship it to the refinery, refine it, and distribute it.

There are other industries making a higher percentage of profit than the oil companies. The banking industry and Microsoft are two of them. Oh, I forgot, their evil too.

Don't be so quick to begrudge any industry their profits. I listened to an oil company executive go over the numbers one night and they were staggering. In order to make people hate the oil companies, the MSM reports only the money coming in and never the outlay. If I can find the figures, I'll post them.

[Herb Schaffler]

I wanted to agree with H2L on this because nohil-billy and I are bitter enemies on foreign policy and H2L and I are pretty much in agreement on foreign policy, but I have to agree with nohil-billy on this. I've worked in the oil and gas industry since 1967, first in oil and gas production, energy construction since 1989. I don't know the exact figures either, but a hugh percentage of oil profits go back into exploration.

[nohil-billy]

And you have my undyting respect for that decision Herb!

[hrdman2luv]

If that be so, then answer this question,

Why, in the Exxon leased (and mineral rights owned oil fields of West Texas) where exxon drills it's own wells, trucks the crude with it's own trucks. Refines the their oil with their refineries and then truck it to their stations with their own trucks, less than 25 miles away from each other. And the price is the same their as it is 500 miles away?

Seriously, what difference does it make where the oil companies drill in the USA? It's all just a smoke screne.
The government nor the Americans own the oil. The oil companies do. And from what I understand, there is little to no honesty on anything the oil companies report.

The proffits that were reported are just that......"PROFFITS".....That means after all is paid, thats what they kept. Proof: If the oil companies were all just passing on the cost of doing business, then why in 1995 were the proffits around $3 billion per year. And now, up to $40 million proffits? Was the cost of doing business in 1995 more than it is now? I don't think so.

Oil companies are lyar's.....Congressmen are lyars.....The whole supply and demand factor is a lie......Believe it or not.

[nohil-billy]

Don't quote me on this, but I believe that it's now international law that all oil is pooled for pricing purposes which means that when gas goes up to $4 a gallon here, it rises to $9 or $10 in Europe. We cannot control pricing without controlling supply. Right now we control about 3%.

As for the profits, I think your wrong. Those are simply after tax profits. This is why Republicans argue that if you tax corporations too much, they can't sink any of their profits into improvements, expansion, etc...

[Herb Schaffler]

American corporations are the highest taxed corporations in the world. Corporate taxes are at 39%, the only country with higher taxes is Japan at 40% If Obama raises these taxes even higher, it will worsen our economy. And in order to pay for his European style socialist state, he probably will raise corporate taxes.

The reason why gasoline prices tend to be close to each other across the country is because of fungibility. Supply and demand does work. The prices are based on the total supply and demand of the international market. The reason why gasoline prices are so high in Europe is because of the high taxes placed on their gasoline to pay for their social welfare state. Another thing we can look forward to when Obama socializes this country.

It's true that with the prices of oil higher now, oil companies are making higher profits, but they're not the reason for the high prices. The war in Iraq and speculation have helped drive up the price. Proof that oil companies don't have that much control on the price of oil is 1986. In that year, oil companies lost their a$$e$. That would have never happened if oil companies really had that much control on prices. Even some of the biggest critics of big oil had to admit that.

[hrdman2luv]

Originally Posted by nohil-billy

Don't quote me on this, but I believe that it's now international law that all oil is pooled for pricing purposes which means that when gas goes up to $4 a gallon here, it rises to $9 or $10 in Europe. We cannot control pricing without controlling supply. Right now we control about 3%.

As for the profits, I think your wrong. Those are simply after tax profits. This is why Republicans argue that if you tax corporations too much, they can't sink any of their profits into improvements, expansion, etc...

Oil proffits have risen 300% no matter what figure you use.

And the price in other countries going up doesn't mean squat to me. Especially when Argentina, Brazil and other countries have a price of less than $1.00 per gallon at the pump.

I don't agree with raising taxes on the oil companies. But not because they would make less proffits. But because the greedy bass-tards wouls chrage us even more at the pump. I would never ever take up for anyone/anything that isn't taking up for me. And you can bet, the oil companies would never take up for the american...