The Trouble with Offshore Drilling in America

Some polls suggest up to 73% of American’s support offshore drilling to help decrease our dependence on foreign oil.There are just so many problems it hard to know where to start… so I’ll just make a little list in no particular order.
Before I go on, I should point out that I don’t necessarily oppose offshore drilling, but I think the reasoning is misdirected and relies on American’s ignorance of markets and other issues.

  • The falling American dollar. As the dollar falls more and more, and due to other social/political issues, the Euro is poised to take over the standard by which oil is sold. The result is a further devaluing of the dollar. Offshore drilling does nothing to stop this move as it nothing to do with oil supply but external social/political and economic issues that we can’t really do much about.
  • It doesn’t lower prices at the pump much at all. The best estimates I saw so far say that when the pumps finally come online and are producing at capacity (more on those in a bit), the price at the pump will drop 5 cents. The primary reason is that US refineries are already running near capacity so the added supply does little, and even if you can get more refineries built (which the liberals and environmentalists are against), they cost so much it would do little for the price of gas at the pump.
  • It doesn’t decrease our dependence on foreign oil at all, because oil is traded on the free market and anyone can buy it. This is probably the biggest issue I have with the proposal as it is. Just because it is pulled from American shores and even if it is refined here, doesn’t mean it will be sold here. A large chunk of the Diesel produced in US goes to markets outside the US. Oil is sold on the open market, and there is no guarantee that the US will be the highest bidder. The only sollutions to this problem are ones the conservatives, especially the Neo-Conservatives… especially the Bush/McCain people aren’t willing to do.
    • One solution is to put lots of regulations in place that lock the oil into the US markets. This is against the free markets, so I doubt we would see this solution.
    • Another solution is for the government to do it itself. Form its own company and do all the work itself, with its own employees, own hardware and everything. No contracts to outside companies, but do everything on its own, including the refinement. This solves many problems, low employment, it locks the oil into the US market… but that is the very definition of Socialism and hence a very bad thing (IMHO)… however, despite my hatred of Socialism, I would probably support the idea since it is probably the only solution that results in helping America, which the regulation approach doesn’t fully do.
      Of course, once the oil is refined there is no way to keep the refined product just in the US due to the way the infrastructure works.
  • It will take at least 10 years at best, most likely 20 years for the pumps to be fully operational and operating at expected capacity. Of course the thought is we are thinking long term and decreasing our dependence in the long term, but I already covered how the oil goes to the open market so it doesn’t decrease our dependence at all. Even if it did decrease our dependence, our goal should be as far off oil in 20 years as we can, and nearly completely off in 50. Not off dependence for foreign oil, but oil all together.
    And no, the answer isn’t necessarily bio-fuels, at least not corn (ethanol) or other food based bio-fuel, or even non-food based bio-fuel grown to any real degree on food based crop lands.
    Nor does the answer have to be nuclear, though I have no real opposition to it as modern reactor designs, in theory at least, are safer and produce less waste (speaking in terms of quantity… the bit it does produce is more radioactive) than current designs in use in the US. Nuclear also is perhaps the easiest way to increase electrical supply without using more fossil fuels (read coal… even “clean” coal) without rebuilding the electrical infrastructure to the degree (it still needs rebuilt and restructured some as some of the big multi-state blackouts have shown) some other alternative methods such as solar/wind would require. Opening the Yucca Mountain storage facility would be required before we move on with a nuclear program, and should have been opened a long time ago. However, nuclear alone isn’t a solution.
    • Germany, which has far less sun, even in it’s sunniest spots than nearly the entire US (save for places like Seattle and Alaska) gets 14% of its electricity from renewable sources (mostly solar) and aims for 27% by 2020. Denmark gets 40% right now (one guess on their main renewable source… yes, wind). The modest cost to make the US electrical grid fully compatible and ready for renewable sources like solar is easily offset by the energy potential. The bigger expense is the solar panels themselves, though that is offset by the increased demand and free markets. Our solar/wind potential is so great we would export the energy easily.
    • Hydrogen is a non-starter. The cost to rebuilt and restructure the electrical grid for solar/wind is nothing compared to the cost to build a system to support a hydrogen economy on a national scale. That isn’t to say it shouldn’t be pursued, at least on a local scale all across the country, but to do anything like the way gas/oil is moved is a nearly impossible dream. (In case you didn’t know, oil is mostly refined near the shore where it comes in, then the refined oil/gas is sent along pipelines all over the US to local distribution centers where it may have additives added before going into the tanker truck and sent to the local gas station where the pump itself may add further additives or mix the low grade with premium grade to make a mid grade… This is why the gas refined by Exon/Mobile could be in a BP pump and vica verca as there is no way to track and move the product refined by one company to just that company..
  • The oil companies aren’t even taking advantage of the wells they have now in the US, let alone the areas they are allowed to drill. These are wells that could be to capacity in a few short years, not 10 to 20 like new ones. These are wells that have nothing blocking them from operating at capacity outside the fact it in the oil companies financial best interest not to operate at capacity. What makes people think that adding even more wells would be operated at capacity if they aren’t using the ones they already have?

In the end, offshore drilling does nothing for the American people, only the multinational oil companies. An additional note, we all saw McBush..McCain give that talk on the oil refinery. That trip was delayed in most part due to the hurricane…. the other undisclosed part? There was an oil slick coming out of it that had to be cleaned up and wouldn’t look good on camera when you are trying to sell offshore drilling. Of course for the most part, offshore drilling isn’t dangerous for the environment.
The same can’t be said for the use of the product, but the degree of that is open to debate… I tend to be on the side that oil and other human factors tend not to be the major part of the climate change and that most of the climate change in natural, however that doesn’t mean we shouldn’t do what we can to minimize our impact, even if that impact is only a 100th of a percent… and I am sure it is far more than that, just not the primary cause of climate change… which the extremest called Global Cooling then later on Global Warming, now Climate Change with essentially the same data… admittedly better understanding of said data, but still the inconstancy is kind of funny. None the less we do need to do what we can.

One thought on “The Trouble with Offshore Drilling in America”

  1. I believe that your intial premise undermines itself in that you state that off shore drilling will not help because oil prices are determined on the international market, and that its likely that oil companies might export the oil. Then you go on to say that the reason for high oil prices is the falling dollar. While you are correct on both points, the reason that the dollar is falling is because supply is outstripping demand, as the Federal Reserve turns on the printing presses too frequently.

    As a general rule, if you want to get rich you should sell more than you spend, unfortunately this approach is not popular in the short term. By selling off shore oil leases to the oil companies, it will increase government revenue, albeit a mere drop in the bucket compared to government spending, but it will slightly lessen government shortfalls. Secondly, it will give America a product that it can either consume domestically or export, in the grand scheme of things it really doesn’t matter because taken in net we will still be burning more than we are pumping, and more of our money will be going overseas, thus increasing the external dollar supply driving down demand. True in the scale of of government spending and world economies this is a mere drop in the bucket.

    The driver behind all of the inflation in the commodities markets has been the low interest rates charged to investment firms who are following the momentum of market orders which has lead to a commodities bubble. These low interest rates also increase the money supply, and when you increase the money supply you are going to have inflation. When you raise interest rates or taxes too much you are going to have a recession because you are contracting the money supply.

    The solution to high oil and gas prices as well as inflation in general is to look out for our national interests, first, and make it a priority to produce more than we consume, this will insure a consistent high demand for our dollars both in the debt market and for foriegn trade.

    In the near term, we should forget about the electricity market as electricity is produced entirely with domestic supplies of coal, natural gas, hydro and nuclear with a smidgeon of wind and solar for good balance. Wind and solar would be dismissed as practical sources of energy if the market was not heavily subsidized. I say, neither tax power companies or subsidize them and allow them to compete in a truly free market with as little regulations as possible. Still electricity should not be a political issue because that is something that the free market can handle without government.

    Another thing that we should try to do, is reduce our oil demand. By this, I do not mean that we should scale back our lifestyles, to suggest such a thing just seems unAmerican. Rather, we could make transport fuel out of Natural Gas and coal for about $1.40 a gallon, whatever the government is doing to prevent this stuff from coming to market needs to come to an end now. One thing that the government could do, is upgrade our rail lines by installing highspeed rails. This would kill regional air carriers, but it would reduce the amount of oil that we are burning in domestic jets, while still affording passengers the option of travelling longer distances by plane. Electric locomotives have more horsepower than diesel electric locomotives, and while our rail system is still very good, it could be made much better by electrifying the lines and offering companies incentives for laying double tracks, which would greatly increase the speed of freight rail traffic, which would decrease the need for long haul truckers.

    All of these options would lessen the need for employment, not increase it. Creating jobs should not be a political issue, because for a nation to become wealthy they must become efficient, which means destroying jobs through mechanism and other efficiency creating mechanism where ever possible. This lowers costs, and makes workers availible for other careers. After all, while computers reduced the need for file clerks, they also created a booming industry all their own.

    Lastly, cut wasteful spending. Eliminate garbage like the Department of Agriculture, and the Department of Education. Pull our military back inside of our own borders, and make them a defensive force only. Next Nationalize the Federal Reserve Bank. While its likely not practical to go back to hard money economics, out new fiat money is unconstitutional and the constitution should be amended to define our new fiat money and make it constitutional. This will allow congress to set different interest rates for different sorts of projects, then again considering the incompetence of congress maybe we should just bite the bullet and go back to gold and silver.

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