Monday, June 23, 2008

More Oil Drilling, cont.

NPR today interviewed Henry Lee, director of the Environment and Natural Resources Program at Harvard, about the effects of increased offshore drilling on oil prices.

Some highlights:
  • We don't know until we explore just how much oil or natural gas is undiscovered (my note: so, the claim can't really be made that increase offshore drilling will result in lower gasoline prices).
  • It would take 8-14 years (permits, bidding, planning, construction/development) depending on the complexity of the geological formation and its proximity to shore.
  • In terms of world needs, based on what the White House is saying, total production of oil and gas would be just less than 1% of global production. Not a dramatic change, so no meaningful effect on gasoline prices.
  • There is no oil futures market that speculates on what prices will be 10 years out. Most speculators are in the six-month futures market.
  • There is no way to isolate the "US market" for petroleum -- it is solely a global market. It therefore can't be argued that this oil production, which could be about 7% of total US production, can have an effect on US gas prices. In fact, the only beneficiaries of increased US oil production will be the oil companies drawing the oil out of the ground.
  • Every president elected since Nixon has talked about "energy independence," but ironically, each president has left office with the country more dependent on foreign oil.
The politicians who go on the air or in print and tout the need for increased offshore drilling need to be hammered with the truth. With this issue, as with nearly every other issue, facts need to be checked, and no one should be taken at face value. We can no longer afford to do that.

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