I heard something on the radio that caught my ear, and I had to look it up to be sure I had heard it right. We all know that Bush and some Republicans (including McCain) are pushing to end the ban on offshore drilling. I had heard reasons why this is a “bad” idea from the opposing side (bad for the environment, it would take years to actually get the oil, we need to focus on alternative sources of energy, etc.), but this reason caught my ear:
Barack Obama and fellow Democrats have denounced proposals for offshore drilling as nothing more than a favor to oil companies.
How is that exactly?
It seems to me that the status quo is a favor to oil companies. With supply restricted in comparison to demand, coupled with rampant speculation, oil companies are making a killing. Record profits, in fact (note that I pulled that from a liberal website just for fun). I’ve heard the whole "Blood for Oil" theory that Bush invaded Iraq to get cheap oil as a favor to Big Oil companies. That doesn’t seem to have worked “as planned”, but the status quo is working out much better for Bush’s cronies, don’t you think? The Big Oil companies sit back, don’t explore or increase refinery capacity, but make record profits.
The Democrats have had a hey-day dragging oil executives before congress to drill them on their profits and the high price of oil.
"You have to sense what you're doing to us - we're on the precipice here, about to fall into recession," said Sen. Richard Durbin, D-Ill. "Does it trouble any one of you - the costs you're imposing on families, on small businesses, on truckers?"
The executives said it did, and that they are doing all they can to bring new oil supplies to market, but that the fundamental reasons for the surge in oil prices are largely out of their control.
Here’s a quote from the Americanprogress.org site linked to above :
Rhetorically, President Bush acknowledges that the United States needs to reduce its oil dependence, which would decrease demand, lower pressure on prices, and reduce profits . . . Yet in reality, the president is protecting oil company profits at the public’s expense.
So, let’s walk through this together. We currently have restricted oil supply = record prices = record profits = favor to Big Oil.
Republicans are pushing to expand drilling in the U.S., which would increase supply = lower prices = lower profits = favor to Big Oil? Can you have it both ways?
It sounds like a bit of political rhetoric to me.
15 comments:
Here's an article about Obama's position on this, and I don't think I agree with him.
If oil futures are being traded like stock, and speculation is driving up the price, then a massive change in U.S. energy policy allowing for the future increase in oil supply would cause the price of the "stock" to drop, right?
And the windfall profits tax thing - that's just a terrible idea and bad math. Raw profit numbers are meaningless; profit margins are all that matters. This guy nails it:
"The average net profit margin for the S&P Energy sector, according to figures from Thomson Baseline, is 9.7%. The average for the S&P 500 is 8.5%. So yes, energy companies are more profitable than many others...but not by an inordinate amount.
Google, for example, reported a net profit margin of 25% in its most recent quarter. Should we have an online advertising windfall profit tax?"
In other words, you can spend $10 and make $1 or you can spend $1000 billion and make $100 billion and it's still 10%. Now, you might be able to make a case that oil is controlled by an oligopoly of five or six massive companies, but I don't really know about that.
I disagree with Obama's policy idea here until someone convinces me otherwise.
Mike, I also disagree with Obama on offshore drilling and the windfall profits tax.
I actually support offshore drilling, and potentially drilling in ANWR so long as strict environmental regulations are in place. Obama is absolutely right in one respect - this will not help the American consumer anytime soon. McCain said this week that offshore drilling would "be very helpful in the short term resolving our energy crisis." That is a load of election-year crap.
Mike - oil futures are typically contracts for oil production only six months out. Such a change in policy would bring a change in price, but not much (if any) in the short term.
I appreciate that Obama is maintaining a long-term perspective and focusing on developing alternative energy sources, but investing in those programs should not preclude us from using any resources we have or potentially have. If we're going to do more exploration and drilling, however, we also need to stop EXPORTING oil to Japan (and other countries), and oil companies need to be allowed to produce where they already have wells drilled, in Alaska, Texas, and Wyoming. And of course the environment needs to be respected as well.
With respect to tax policy, the change that needs to be made is to remove the tax breaks the oil companies receive today.
I know I've mentioned this on politicaLDS before, but while we're on the topic, the federal gas tax holiday proposed by McCain and Clinton is also a big load of election-year crap. According to several watchdog groups (and the Congressional Budget Office), the moratorium would save the average consumer less than $30 this summer, while destroying the solvency of many federal and state infrastructure programs (roads, bridges, public transit, etc.).
Yes, BBD. I agree with that: the federal gas tax holiday is pandering to the public. It's a "token offering".
I've heard that this whole off shore drilling stuff won't get us any oil for about ten years. The oil companies still have to decide if it is worth their efforts, find oil, build platforms, and tap into the earth (which is a process in and of itself seeing as there is all that water in the way...). In my little apparently-not-so-conservative-on-this-issue mind, this is stupid. My argument here isn't even going to be an environmental one, but I'll go back to what I was trying to say in a post long, long ago:
WE NEED TO GET OVER THE WHOLE OIL DEPENDENCE THING. NOW. SERIOUSLY.
I hate to break it to everybody, but if we are still as oil dependent in ten years as we are now, we are going to be praying for $4 a gallon gas.
("Hey, remember when gas was only 4 bucks a gallon?" "Yeah, and remember how everybody was complaining and the economy about tanked?" "Yeah, I guess we didn't really have anything to complain about, huh?" "I guess not. Well, I've got to go to work. Got that 90 minute bike ride ahead of me, you know!")
C'mon, people! No more oil!
I want to say that I was honestly on the fence about Obama. But the campaign finance FLOP and now these *questionable* energy policy initiatives have given me serious pause.
Can this country pleeez have a serious discussion about nuclear energy? I am saddened and dismayed that no Democrat in America can bring him/herself to say the word! We cannot afford to have our next president hesitant in addressing the only viable solution to the long-term energy supply situation.
On a positive note, I have noticed that every other commercial on CNN these days is of an energy company: BP, Clean Coal, etc., and the car commercials all talk about fuel efficiency and hybrid and electric. This is a positive step; it means companies see alternative energy as profitable, or at least as salable.
Hello all, first time post :)
I agree with Joel, in that whether or not you agree with either McCain or Obama (and I'm not sure I agree with either), this particular issue is part of a larger one. The debate we should be having, and I believe it is moving more and more toward this, is not whether we should be drilling in the Gulf or ANWR, but where our country's energy future lies. Oil, even if tomorrow someone in Texas dug a hole and found a deposit the size of Saudi Arabia, is still, eventually, someday, GOING TO RUN OUT. And before it does, it will have destroyed our planet's environment.
But back to the smaller question: I disagree with senator McCain's (and Mike's) assumption that raising the supply of oil by drilling in the gulf will lower prices. We're operating here under two false assumptions when it comes to oil- that when supply is greater than demand, prices drop, and that currently there is more demand than supply. Firstly, the worldwide balance of supply and demand is heavily weighted toward the SUPPLY side, not the other way around. In fact, the US Department of Energy predicts that worldwide surplus production capacity will by 2010 continue to grow to between 3 and 5 million barrels a day. Where is all this extra oil going?
Right into the hands of oil companies and refineries. Which brings us to the next point: with oil, history has shown that the more you supply, the more we demand. Demand always manages to keep up with supply, even if the extra oil doesn't make it into our cars. Case in point: due to the grossly inflated oil speculation, oil companies and refineries are buying and storing EXTRA oil now, because what can be bought today at $125 dollars can be sold 6 months from now for $150. So will increasing supply solve the problem? No, because the price of oil literally at this point has very little to do with supply/demand. It's entered the stock market realm of speculation and commodities trading (which isn't really the same as stock trading) now, and that's roughly equivalent to entering the twilight zone.
I support the profits tax... for the simple fact that oil companies don't make cars or computers or sell insurance or loan credit or do any of the other myriad of things the companies in the S&P 500 do. They sell oil, which in this day and age is a necessity, not a luxury. Equate it to buying food (which is more relevant than you'd think- imagine how much more a loaf will bread will cost when the cost of baking it, transporting it, and fertilizing the field it came from more than triples. Talk about a global food crisis). Would the goverment allow dairy farmers to make that much profit, regardless of margin percentages, if people couldn't afford to buy milk? Of course not. And if you can't buy milk, all that happens is your bones wither and die. Imagine the economy grinding to a halt because people can't afford to drive their SUV's 30 miles into the city to work because their houses are built in American suburbs that always assumed oil would be plentiful and cheap. In other words, oil is no longer a free enterprise commodity... it's a necessary requirement of daily life, and the federal government in this country has always regulated such things. Just ask those dairy farmers who receive a subsidy to produce milk so the rest of us don't have to pay $10 for a gallon of 2%.
But all this isn't the point. Someday, somewhen, all the oil will be gone. And that day, if we have not made oil-dependent technology obsolete, will quite literally be the end of the world. I would rather take our time and make the transition slowly now, because we want to, rather than then, because people are starving to death. America holds a position of great power in this world. And, like spidey says, great power=great responsibility. We led the world in it's love affair with oil. Don't you think we owe it to the world to see if we can't make it obsolete?
I disagree with you, Mike - I really think Obama's position is the only logical one. And I agree with the new guy (anonymous ?) that the only way to fix this problem is to work towards erradicating our dependance on foreign oil.
All we need to do is pretend to set up our own oil refineries. As soon and the middle east thinks we have our own supply the gas prices will go way down.
Matt,
Three things:
A) We already refine most of our own gas.
B) Current oil prices have little to do with what the "middle east" thinks.
C) OPEC makes a concerted effort to keep oil prices low, because high prices encourage conservation and research into alternative technologies.
I keep hearing that we should have started more offshore drilling and expanding refinery capacity 20 years ago. We probably would have except that oil prices fell again. If we should have started then and are now finding ourselves in this mess, why not start to be energy independent now?
Last weekend, Saudi Arabia hosted oil talks. Honestly, between this meeting and President Bush a couple of months ago, it seems to me like the U.S. is on its knees begging Saudi Arabia and OPEC to increase output. It's pathetic. I would rather see us in the U.S. doing everything we can to become energy independent.
I want to build more nuclear plants, wind power plants, solar plants. I heard a guy on the radio talking about battery-operated cars that will probably come out in 2011. The only problem with that is that they run on electricity, and electricity is starting to skyrocket, too. My bill is 2-3 times what it used to be, depending on the month. So, what do we do when we all switch over to electric cars, and electricity is through the roof? Let's work on all fronts, with the goals of energy independence and cheap power.
Stephanie wrote, "I keep hearing that we should have started more offshore drilling and expanding refinery capacity 20 years ago. We probably would have except that oil prices fell again."
Why did prices fall? because we threatened to produce our own oil. As soon as they believed us, prices fell drastically. This is why I suggest that all we have to do is pretend. As soon as America's oil producers see that Americas will no longer be buying oil they will do anything to bring us back.
I don't think that we should move away from oil completely but other sources of energy are a must, particularly nuclear energy.
Not only will electric prices go way up with mass production of electric cars, but it will also be the next big tissy for environmentalists. "Electricity is cooling the earth too much!", because of course we will be in the natural cycle of cooling by then:)
Matt, I agree, except that I think we need to move toward complete independence from the Middle East. We should be able to create all our own power here in the U.S. When oil prices fall again, I hope we don't forget the lesson we've learned.
According to this , Mercedes-Benz says it will be producing ONLY electric cars by 2015. General Motors swears it will have its electric commuter model (the Volt) in dealerships by 2010. If there's anything to these reports, the price of oil ought to be coming down soon enough. Just maybe we will not have compromised the aesthetic qualities of our coastal and wilderness areas by then. Sure, it's true that all that extra electricity will have to be generated somehow, which means other possible environmental problems, but at least we won't feel pressured to drill for oil in particularly beautiful places.
--David
Windmills, David. Windmills.
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