The Oil Reality

Yesterday we saw the people who have done the most to keep oil prices high (e.g. Congress) trying to blame shift their policy failures onto oil company executives.  Hilariously, Maxine Waters thinks she would do a better job for consumers if she were in charge of the US oil companies. 

Beyond the realities of supply and demand, which I guess we all despair of teaching Congress, there were these remarks by Shell's John Hofmeister (via Powerline):

While all oil-importing nations buy oil at global prices, some, notably
India and China, subsidize the cost of oil products to their nation's
consumers, feeding the demand for more oil despite record prices. They
do this to speed economic growth and to ensure a competitive advantage
relative to other nations.

Meanwhile, in the United States, access to our own oil and gas
resources has been limited for the last 30 years, prohibiting companies
such as Shell from exploring and developing resources for the benefit
of the American people.

Senator Sessions, I agree, it is not a free market.

According to the Department of the Interior, 62 percent of all
on-shore federal lands are off limits to oil and gas developments, with
restrictions applying to 92 percent of all federal lands. We have an
outer continental shelf moratorium on the Atlantic Ocean, an outer
continental shelf moratorium on the Pacific Ocean, an outer continental
shelf moratorium on the eastern Gulf of Mexico, congressional bans on
on-shore oil and gas activities in specific areas of the Rockies and
Alaska, and even a congressional ban on doing an analysis of the
resource potential for oil and gas in the Atlantic, Pacific and eastern
Gulf of Mexico.

The Argonne National Laboratory did a report in 2004 that identified
40 specific federal policy areas that halt, limit, delay or restrict
natural gas projects. I urge you to review it. It is a long list. If I
may, I offer it today if you would like to include it in the record.

When many of these policies were implemented, oil was selling in the
single digits, not the triple digits we see now. The cumulative effect
of these policies has been to discourage U.S. investment and send U.S.
companies outside the United States to produce new supplies.

As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.

The problem of access can be solved in this country by the same
government that has prohibited it. Congress could have chosen to lift
some or all of the current restrictions on exportation and production
of oil and gas. Congress could provide national policy to reverse the
persistent decline of domestically secure natural resource development.

This is a point I have made for a while:

Exxon Mobil is the largest U.S. oil and gas company, but we account for
only 2 percent of global energy production, only 3 percent of global
oil production, only 6 percent of global refining capacity, and only 1
percent of global petroleum reserves. With respect to petroleum
reserves, we rank 14th.
Government-owned national oil companies dominate the top spots. For an
American company to succeed in this competitive landscape and go head
to head with huge government-backed national oil companies, it needs
financial strength and scale to execute massive complex energy projects
requiring enormous long-term investments.

Lots more good stuff, check it out.

  • Simon

    Maxine Waters sees herself as a ruler, a dictator really. With Obama and Hillary threatening to take away oil profits (read: shareholder's money), Ms. Waters is just taking it a step further.

    Unfortunately for Ms. Waters, she broke the rule that all Liberals follow. That is: Write it, whisper it, vote it, want it, but never say it out loud. Now, What is it? "It" is the complete socialization and nationalization of all commerce in the US, not to mention the enslavement of everyone, except for our ruler, her.

  • Simon

    Maxine Waters sees herself as a ruler, a dictator really. With Obama and Hillary threatening to take away oil profits (read: shareholder's money), Ms. Waters is just taking it a step further.

    Unfortunately for Ms. Waters, she broke the rule that all Liberals follow. That is: Write it, whisper it, vote it, want it, but never say it out loud. Now, What is it? "It" is the complete socialization and nationalization of all commerce in the US, not to mention the enslavement of everyone, except for our ruler, her.

  • Simon

    Maxine Waters sees herself as a ruler, a dictator really. With Obama and Hillary threatening to take away oil profits (read: shareholder's money), Ms. Waters is just taking it a step further.

    Unfortunately for Ms. Waters, she broke the rule that all Liberals follow. That is: Write it, whisper it, vote it, want it, but never say it out loud. Now, What is it? "It" is the complete socialization and nationalization of all commerce in the US, not to mention the enslavement of everyone, except for our ruler, her.

  • Simon

    Maxine Waters sees herself as a ruler, a dictator really. With Obama and Hillary threatening to take away oil profits (read: shareholder's money), Ms. Waters is just taking it a step further.

    Unfortunately for Ms. Waters, she broke the rule that all Liberals follow. That is: Write it, whisper it, vote it, want it, but never say it out loud. Now, What is it? "It" is the complete socialization and nationalization of all commerce in the US, not to mention the enslavement of everyone, except for our ruler, her.

  • The Dirty Mac

    You tell 'em Simon

  • Rufus

    I'm building a "Still."

    Ethanol is Cheaper than Blood!

  • http://highwayx.wordpress.com Highway

    I actually don't have too much of a problem with the US not pumping and selling the oil within its borders, while we let the rest of the world deplete their oil reserves by selling it to us! Then we'll have it all, and it will be even more expensive.

    Yes, prices are high, but pumping oil out of the US isn't gonna fix that, and we're not going to ever be 'energy independent'. So let's just give up that stupid fantasy. Let's just let things work themselves out. The only thing I'm really against is government stepping in to do stupid stuff like subsidize oil prices, or punish oil companies with idiotic taxes.

  • http://ragnard.wordpress.com Ragnard Danneskjold

    Highway, you say you're against government subsidizing oil price. What do you think the net effect of a moratorium on oil exploration is?

    I just posted something about this on my blog:
    http://ragnard.wordpress.com/2008/05/24/massive-loot-grab/

  • Dan

    I'm a Democrat, but I'm ashamed of my party for the type of garbage it's spewing in D.C., blaming oil companies for the mess we're in. They're a convenient target in an election year, but blaming them is not a solution to the problem at hand. Indeed, the oil executive who spoke was right: U.S. oil production has steadily fallen for almost 40 years, and much of this is due to restrictions on drilling.

    I'm not sure how much U.S. oil is currently off limits to exploration, and it may be too late now for this oil to help much, because it would take decades to explore and develop. Lack of foresight by both parties - including Republican presidents like Ronald Reagan who told us we could do away with energy efficiency and oil alternatives and live off of imported oil in perpetuity, has left this country in a major fix.

    A combination of better energy efficiency of the kind touted by President Carter, combined with better access to new sources of domestic oil that Democrats (and some Republicans, particularly in states like Florida with its NIMBY policy toward off-shore drilling) prohibited, would have led to a better outcome. We'd be less dependent on oil, and would have more oil of our own to take care of our lesser needs.

  • Mesa Econoguy

    Wow. Lots of dumb statements in here:

    I'm a Democrat, but I'm ashamed of my party for the type of garbage it's spewing in D.C., blaming oil companies for the mess we're in. They're a convenient target in an election year, but blaming them is not a solution to the problem at hand. Indeed, the oil executive who spoke was right: U.S. oil production has steadily fallen for almost 40 years, and much of this is due to restrictions on drilling.
    Posted by: Dan

    Yes, Democrats are morons, in any year. Democrats have blocked the major domestic [offshore] drilling sites for over 30 years. They continue to do so, because they are morons.

    I'm not sure how much U.S. oil is currently off limits to exploration,
    Posted by: Dan

    Lots. Even the Chinese are drilling there.

    and it may be too late now for this oil to help much, because it would take decades to explore and develop. Lack of foresight by both parties - including Republican presidents like Ronald Reagan who told us we could do away with energy efficiency and oil alternatives and live off of imported oil in perpetuity, has left this country in a major fix.
    Posted by: Dan

    Why restrict supply? What a stupid line of reasoning "Oh it won't help anyway..." Yes it will, and you don't know that. Unbelievable stupidity.

    I don't recall Reagan ever making the statement "We can live off imported oil in perpetuity." That is false.

    A combination of better energy efficiency of the kind touted by President Carter,...
    Posted by: Dan

    Yeah, he did real well.

    ...combined with better access to new sources of domestic oil that Democrats (and some Republicans, particularly in states like Florida with its NIMBY policy toward off-shore drilling) prohibited, would have led to a better outcome. We'd be less dependent on oil, and would have more oil of our own to take care of our lesser needs.
    Posted by: Dan

    Wrong. The price of oil should theoretically be lower, causing greater "reliance" on it.

    Dan, please think before posting. You're not much in the analysis department, and you obviously have never studied economics. You're a Democrat, so you get a mulligan the first go-around.