Drill Now, or Pay More Later

I used to wonder why the United States didn’t work vigorously to free itself from dependence on “foreign oil.” It seemed like a good idea to me “back then”—during Jimmy Carter’s presidency. Popular opinion was that there wasn’t much oil to be found outside the OPEC region. After all, “OPEC” is the acronym for “the Organization of the Petroleum Exporting Countries.” And who were the petroleum exporting countries? The original five members of OPEC were Iran, Iraq, Kuwait, Saudia Arabia, and . . . Venezuela.

Do you see a pattern here? Four of these countries were and are dominant Middle East players. Venezuela, it should be recalled, is the heavy in South America, led today by Hugo Chavez—no friend to the United States. And Venezuela took the initiative originally to establish OPEC, by approaching the just-mentioned nations of the Middle East.

There are now thirteen member states in OPEC. Guess who’s not on the list? The United States. And why not? Because the United States does not export oil. On the contrary, for decades, the United States has been the chief importer of oil.

Why doesn’t the United States export oil? Because it doesn’t have enough oil to export. It doesn’t even have enough oil to meet its own demand. That makes us dependent on foreign oil. And that’s reason enough for us to be entangled in Middle Eastern politics and subject to the whims of blame-America-first terrorists born and bred in the Middle East.

At the outset of the war in Iraq, there was loud speculation that President Bush was making a grab for Iraqi oil. This speculation was interlarded with denouncements of the merit of such a motive.

And where do we find ourselves today? Gas at the pump where I live in southern California is very near the $5 mark, and the price of oil has just topped $140 a barrel, a new high. Market watchers are hyper-ventilating this afternoon. At CNBC, Maria Bartiromo is high on adrenalin as she reports the news.

What’s wrong with this picture? The United States has waited too long to tap its own oil resources. Do we have oil? Yes. And, no. We don’t have much oil for use, much less for export. But there’s oil out there, on the continental shelf and in ANWR. And it’s been there throughout our dependence on oil. And there’s lots of it. Enough there for us to tell OPEC we don’t need them anymore.

Imagine what it would mean geopolitically if we ended our dependence on oil in the Middle East. Setting aside the legitimate interest we have in protecting Israel, we might be able to sustain a responsible form of “protectionism.” As long as our economy runs on oil, we’ll continue to be enmeshed in worldwide conflicts that are fueled by oil dependence.

What are the primary objections to drilling the oil resources we have?

First, we’re being told that “we can’t drill our way out of the current crisis.” One element in this rhetoric is right: we are in crisis. The crisis goes deeper than the prospect of paying $5 and more per gallon of gasoline.
But that prospect is the sort of crisis that has Americans paying more than the usual degree of attention to political maneuvering in Congress and among the presumptive nominees for President, Barack Obama and John McCain.

Obama is the most visible opponent of drilling. He talks about developing alternative forms of energy. But that won’t address the crisis, either. Why? Because the crisis is at the pump. And most of us are stuck with pumping gas for the foreseeable future. It will take a few years to begin extracting crude oil from the ground. Will it take longer than the development of alternative energy forms? Almost certainly not.

Any major delays to drilling going forward will be due to obstructionist politics, mostly on the part of Democrats, and chiefly on the part of Barack Obama, if elected President. Obama could not now reverse his view about the wisdom of drilling without appearing to be the worst kind of flip-flopper. So he’s backed himself into a corner. What’s in the economic interests of the country is at odds with Obama’s interest in becoming President. Whose interests will command his attention? You know the answer. So ask yourself if that’s the sort of person you want to have as President.

What most Americans want is short-term relief at the pump and a long-term solution to our energy crisis. If the establishment of a drilling infrastructure—directed at the most promising locations off-shore and in ANWR—were to begin in earnest by the end of this year or early next year, we wouldn’t have to wait for the oil to make it to the corner gas station for prices to come down. The prospect of such a radical change in supply and demand within three to five years would place immediate pressure on current suppliers (i.e., OPEC) to do something about prices. John McCain has started making this point, and he’s right. How does Obama respond to that? If Americans elect John McCain, who favors drilling, OPEC will get the message before the end of the year. We’re only about four months away from sending that message.

Second, there’s the green-jerk reaction to drilling. “Drilling offshore and in ANWR is going to be environmentally catastrophic.” Show me the evidence.

Opponents of offshore drilling exploit vernacular associations with the word “offshore,” as if America’s beaches will be cluttered with unsightly oil rigs. What’s the truth? Deep-water oil and gas platforms will be so far offshore that they couldn’t be seen from our beaches. We’re talking fifty to two hundred miles offshore. I could kayak the entire California shoreline and not be able to plot a single oil drilling site offshore. It would take an hour or longer to travel by helicopter to a typical offshore platform.

ANWR is another acronym (pronounced “Anwar”), short for “Arctic National Wildlife Refuge.” It’s located in the extreme northeastern region of Alaska and encompasses some 19 million acres. It includes what is literally the most remote territory in the United States. A portion of the region contains rich sources of petroleum. In contention is the effect drilling there would have on the habitat of diverse forms of animal life. ANWR is remarkable for its inclusion of six distinct biozones. But the petroleum rich subsection of ANWR is part of a 1.5 million acre extension of the refuge made in 1980. The move appears to have been as much an effort to protect this resource for possible future drilling as it was for any other environmental objective.

A very small percent, then, of ANWR is even considered attractive for oil-production purposes. And yet the resource is thought to be incredibly rich. And though approval by Congress is required to begin drilling in that area, it has, from the beginning, been regarded a potential source of oil production to be used under the right conditions.

Americans need to be educated about the potential for oil production in ANWR, the politics surrounding the possible use of this resource, and alternatives to drilling in ANWR. For the time-being, offshore drilling appears to be more imminent than drilling in ANWR. This is in part due to political vicissitudes. But off-shore production may also be more cost-effective. In any case, ANWR need not be the bone of contention that it has been, with such impressive resources closer to hand, both geographically and politically.

The emerging market demand for oil worldwide could position the United States to be a major exporter of oil. This demand will be so substantial by 2030 that prices for a barrel of oil could inflate to unimaginable levels. But by then, the United States could be online as a major oil producing country.

Meanwhile, by all means, we should be heavily invested in research and development for alternative forms of energy. And Americans should become better informed about the affordability, safety, and cleanliness of nuclear energy.

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About Doug Geivett
University Professor; PhD in philosophy; author; conference speaker. Hobbies include motorcycling, travel, kayaking, sailing.

3 Responses to Drill Now, or Pay More Later

  1. Doug Geivett says:

    Thank you, Paul, for your incisive reflections and the update you give on the issues at stake.

    Like

  2. Paul Krisak says:

    Doug, thanks for writing on a subject. Supplemental to your thoughts here, another reason for the continuing dependence of foreign oil could be the petrodollar? This helps the dollar as the reserve currency since oil transactions with OPEC nations are done in US dollars. This would fit (possibly although I’m not saying this is the reason) into the denial of the Keystone Pipeline by Obama. Although, its been a few years since your post, there are recent global events (BRICS bank for one) that threaten the US dollar as the reserve currency which, at some point, will no longer be the case. Furthermore, as Jim Rickards recently pointed out, that Obama has stabbed Saudi Arabia in the back by allowing Iran to be the Mid East “cop on the beat” as he says as opposed to that honor normally going to Saudi Arabia. My point being, we may have to lose our dependence of foreign oil when we lose our position as the world’s reserve currency. Similarly, watch for the possibility of the US reluctantly going to the gold standard for a “seat at the table” with other foreign powers (like Russia & China who have amassed a great deal of gold in recent years). Overall, your discussion on oil has a great deal of ramifications for not only our economy but the economy around the world. There is a good deal of interplay on a number of levels that your good blog cannot address (however, your blog was well done and specific as it should be).

    Like

  3. Anonymous says:

    Doug, thanks for writing on a subject. Supplemental to your thoughts here, another reason for the continuing dependence of foreign oil could be the petrodollar? This helps the dollar as the reserve currency since oil transactions with OPEC nations are done in US dollars. This would fit (possibly although I’m not saying this is the reason) into the denial of the Keystone Pipeline by Obama. Although, its been a few years since your post, there are recent global events (BRICS bank for one) that threaten the US dollar as the reserve currency which, at some point, will no longer be the case. Furthermore, as Jim Rickards recently pointed out, that Obama has stabbed Saudi Arabia in the back by allowing Iran to be the Mid East “cop on the beat” as he says as opposed to that honor normally going to Saudi Arabia. My point being, we may have to lose our dependence of foreign oil when we lose our position as the world’s reserve currency. Similarly, watch for the possibility of the US reluctantly going to the gold standard for a “seat at the table” with other foreign powers (like Russia & China who have amassed a great deal of gold in recent years). Overall, your discussion on oil has a great deal of ramifications for not only our economy but the economy around the world. There is a good deal of interplay on a number of levels that your good blog cannot address (however, your blog was well done and specific as it should be).

    Paul Krisak

    Like

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