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The Democrats and Off-Shore Drilling

by ROBERT BRYCE

Just when you think the Democrats can’t get any dumber when it comes to energy policy, they surprise you.

The latest development is their refusal to allow offshore drilling in the U.S. Their reasons for continuing the ban on offshore exploration are familiar: there’s not much oil to be found; drilling now won’t do any good in the near term; and finally, we’re “addicted” to oil.

The answers to those points are, respectively: wrong, wrong, and yeah, so what?

Before discussing offshore drilling, it should be noted that the Democrats’ refusal to allow more exploration comes just a few weeks after the Democrat-controlled House of Representatives overwhelmingly approved (324 to 84) a bill that could allow the U.S. to sue OPEC for not producing enough oil.

That measure had an impact – although it was probably the opposite of what they were hoping for. On June 26, Libya’s top oil official, Shokri Ghanem, told Reuters that his country was considering a production cut – an announcement that added further worry to the oil markets and helped propel prices to more than $140 per barrel for the first time. The reason for Libya’s truculence: Congressional threats to sue OPEC. “There are threats from the Congress, said Ghanem about taking OPEC to court and thereby, “extending the jurisdiction of the U.S. outside the U.S.”

The Democrats apparently believe that threatening to sue OPEC – along with hating oil and the oil companies – is a reasonable substitute for a meaningful energy policy. And the threat by Libya to cut production could be just the beginning of a further deterioration in the relationship between the U.S. and the world’s oil producing countries.

But I digress. Back to offshore drilling.

The Democrats and their Green/Left supporters are all singing from the same deranged hymnal when it comes to oil. Their first claim is that there’s not enough oil – either in the Arctic National Wildlife Refuge, or offshore – to make a substantial difference in the global oil market. For instance, on June 25, Dean Baker, writing for Truthout, declared, “There is just not that much oil in these restricted offshore areas.”

Nonsense. According to the Minerals Management Service, the offshore areas that the Republicans – led by John McCain and George W. Bush — want to open to exploitation may contain 86 billion barrels of oil and 420 trillion cubic of natural gas. (For reference, the U.S. consumes about 7.6 billion barrels of oil and 22 trillion cubic feet of gas per year.) By any measure, that’s a lot of hydrocarbons. And yet 85 percent of America’s Outer Continental Shelf is off-limits to oil and gas exploration.

What about ANWR? Again, the Democrats claim there’s not much to be had by drilling. But according to  the U.S. Geological Survey, the refuge may holds reserves equal to about one-third of America’s oil reserves and more than half of its gas reserves.

Simply put, the people who say there’s not much oil to be found offshore don’t know what they are talking about. The biggest discoveries in recent years have happened offshore. In September 2006, Chevron, Devon Energy, and Norway’s Statoil ASA announced a major discovery with the Jack No. 2. The well in the deepwater of the Gulf of Mexico, about 270 miles southwest of New Orleans, found a major field in a geological area called the lower tertiary trend. It may hold up to 15 billion barrels of oil, an amount that could boost America’s reserves by 50 percent.

Last November, the Brazilian national oil company, Petrobras, announced the offshore Tupi discovery, which may hold 8 billion barrels of oil equivalent. It’s the second-largest oil find in the last 20 years. Since then, the Brazilian oil giant has announced numerous smaller offshore fields containing sizable quantities of oil and gas. And for the Brazilians, their newly discovered fields in the huge Santos Basin likely contain hundreds of millions, or perhaps billions, of barrels of oil.

Now to the second point: the Democrats regularly claim that more drilling won’t effect prices right away. For instance, on June 20, Barack Obama said that more drilling would not lower gasoline prices “this year, next year, five years from now.”

He’s probably right. It’s true that the lack of available drill ships and the long lead time needed to develop offshore fields – including leasing, drilling, and development – means that new oil production from those offshore fields may be a decade away, or more. Further, developing those fields will be enormously expensive. But if we are going to have sufficient oil and natural gas in the coming decades, we have to start drilling. Petrobras, one of the most successful oil companies of the modern era, has had success in the waters east of Rio de Janeiro because it has been exploring for oil almost continuously for the past several decades. The results can now be seen in the company’s steadily increasing production.

Despite these facts, the Democrats continue the same refrain. In May, Democrat Richard Durbin of Illinois, declared “We can’t drill our way to lower prices.”

Okay. Let’s test Durbin’s theory by discouraging all drilling, everywhere. If Durbin and his fellow Democrats really believe that we can’t drill our way to lower prices, then Congress should immediately pass another bill threatening to sue OPEC. But this legislation should threaten litigation against OPEC members if they start drilling too much. Imagine how helpful that would be with regard to lowering prices at the pump.

In short, refusing to allow more drilling in the near term will mean less supply, and thus higher prices, over the long term. Claiming otherwise ignores the realities of the global oil market which is seeing ever-increasing demand at the same time that excess production capacity is nearly non-existent. And that, of course, has resulted in drastically higher prices.

If you don’t believe American drilling can affect prices, consider what Chakib Khelil, the Algerian Minister for Energy and Mines and president of OPEC, said today (July 1) in Madrid at the World Petroleum Congress. Asked by an American reporter about what measures the U.S. could take to help lower oil prices, he suggested that the U.S. needs to stabilize the value of the dollar. And then he said, “open up your exploration. In Algeria, we have a bidding round [for new oil exploration licenses] going on. We are open. The U.S. also needs to open — offshore Florida; offshore Alaska need to be opened to exploration.”

Americans love to hate OPEC. But when the head of OPEC says the U.S. should drill more to help increase supplies, and therefore lower prices, perhaps American politicians – and that means the Democrats — should pay attention.

Finally, the “addiction” argument. Ever since George W. Bush’s 2006 State of the Union speech in which he said the U.S. is addicted to oil, neoconservatives, Greens, and Democrats have all been repeating the addiction  line. For instance, on May 13, the Sierra Club’s executive director, Carl Pope, declared that “The answer to our oil addiction is not to search for a bigger fix.” Given that addiction, Pope claims it makes no sense to drill in Alaska or offshore.

Fine. We are addicted to oil. Please pardon me for asking the obvious, but impertinent question: so what?

Every other country on the planet has the same addiction. We use oil because the world’s transportation system is almost wholly dependent on oil.  There are now about 800 million motor vehicles in use around the world. In the U.S. alone, there are some 251 million registered motor vehicles. That fleet includes 6.6 million motorcycles and 135 million passenger cars. The U.S. also has over 8,000 commercial aircraft, 224,000 general aviation aircraft, and 12.7 million recreational boats. Now add in several thousand more train locomotives and several thousand commercial ships.

We can talk about renewable energy until Dick Cheney gets indicted, but those millions of machines do not, cannot, be run on  sun juice and sails.

Converting the bulk of the world’s vast transportation fleet to non-liquid petroleum forms of energy – whether it’s electricity or natural gas or hydrogen or some other source — will likely take most of the 21st century. This point was made succinctly by Vaclav Smil, a distinguished professor of geography at the University of Manitoba who has spent most of his career writing about energy. He recently wrote that “Energy transitions span generations and not, microprocessor-like, years or even months: there is no Moore’s law for energy systems.”

None of what I’m saying here is an argument to do nothing. Far from it. Instead, it’s an acknowledgement of reality: We will only quit using hydrocarbons when something else comes along that is cheaper/cleaner/more convenient. As oil gets more expensive, alternatives will become more economic. But we cannot force those innovations and alternatives to develop. And while we wait for those alternatives to become commercially viable, we should not risk ruining our economy just because the Democrats and their Green/Left allies hate oil and the oil companies.

America needs oil. The world needs oil. And we’re going to continue needing it – particularly for transportation – for decades to come. By preventing the exploitation of domestic oil resources, the Democrats are hurting America’s long-term interests. Unfortunately, it may take much higher oil prices, perhaps $200 or $300 per barrel, before they realize how ruinous their energy policies have been.

The irony of their anti-oil position is equally clear: the high oil prices that will result from their policies will be most hurtful to the poor and working class – the very same people that the Democrats claim to be representing.

ROBERT BRYCE is the author of Gusher of Lies: The Dangerous Delusions of “Energy Independence.” He can be reached at: Robert@robertbryce.com

 

 

 

 

 

 

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