Politicians and Oil

June 6, 2008

The price of oil has been on my mind a lot lately. This morning’s WSJ had an article about how Congressman Bart Stupak is looking for the villian responsible for high oil prices. He claims oil prices are being manipulated by trading houses and futures markets. He may be right but I think he and the rest of congress must share in the blame for high oil prices for two reasons:

1. They won’t allow our companies to drill here in the U.S.


2. They aren’t investing enough in other sources of fuel like biofuels.

Why can’t we allow companies to drill in the U.S. if they promise to do it responsibly AND require them to invest heavily in other fuel sources?

I have no idea how much oil is available here in the U.S. Some argue that there’s very little while others say there’s a lot. I don’t who to believe. All I know is that I’m tired of watching oil soar past record after record while our politicians do nothing but make it look like they are doing something.

13 responses to Politicians and Oil

  1. Don’t forget that its an election year and they are looking for someone to blame. Believe me there is plenty of blame to go around – we can start with ourselves and our oversized vehicles and dependance on personal transportation. We can blame our politicians for not allowing drilling, improving mass trnasportation, etc. We can blame our automakers and other companies for not pursuing alternative fuel sources. We can blame the oil companies for making money. And on and on. Just don’t believe the hype of politicians during an election year – they’ll say anything.

    BTW, I’ll start with the blame on myself – I’m getting ready to hop in my premium fueled v6 car, turn on the air full blast, drive to the bank, drug store, post office, and the gym – all of which are within a mile of my house. But frankly its 95 degrees and I’ve been mowing the grass (electric lawnmower) and walking the dog…and I’m hot (insert violin music here).

  2. The only thing that will fix the problem is moving away from oil, which is already happening, but which will take decades to complete. The US already uses far less oil per unit of GDP than it did a few years ago, which is why high oil prices haven’t cratered the economy.

    Ironically, the political task that could “fix” high oil prices is probably a big tax on oil so people are convinced that cheap gas is never coming back and adjust their life patterns accordingly. Pretty much everything else politicians can do is “for show”; nobody will make any big moves in an election year, and even if they did, the moves won’t be large-scale drilling, especially with Dems in ascendence.

    Already, many markets (like exurban real-estate) are reacting to high oil prices, but this will take awhile. Where I live, the effect is clear: city area real-estate is holding its value and even gone up in some areas, while prices in exurbia have crashed.

    The days when you could afford to live 60 miles from work in a car-only area are coming to an end.

    Some examples in my own world:

    o My company has gone to 60% telecommute, and we use teleconference software for meetings when we aren’t at work.

    o It’s also relocating its offices to “hotelling” suites near train lines. One office will be within walking distance of my house.

  3. Tucker Carlson of MSNBC fame covered this topic in his weekly spot on BTLS last week.

    His major point was that government investment in alternative fuel research is NOT a critical factor, as anyone who develops a viable alternative (not ethanol) to fossil fuels will make Bill Gates look like an average joe.

    He placed blame squarely on the shoulders of our government for: 1) not allowing expanded drilling in the US, 2) not allowing any new refineries in the US (the last one we built was in the 70s, if I remember correctly), 3) subsidizing oil companies through tax incentives, and 4) devaluation of the dollar.

    State government also shares some of the blame, as they are benefitting greatly from the increased price of gas, as gas taxes are a set percentage and thus are bringing in increasingly more revenue. Note that these state governments are the ones fighting the building of new refineries in their state (conflict of interest??). Sure, no one wants a refinery in their backyard, but if you want cheaper gas, you have to make a compromise somewhere.

    Also note that oil companies’ profit margins have been consistent over the past decade, and they owe their increased revenues entirely to a combination of inflation and an increase in the price of oil. Believe it or not, these record profits are a GOOD thing, as it is a very capital-intensive industry and they will need a significant amount of capital to fund research and development for alternative fuels.

  4. I agree with Foobarista-we have to move away from oil. Domestic drilling will only prolong the inevitable. I doubt we will run out of oil in my lifetime, but eventually it has to run out. Once the energy and oil companies figure out how to make alternative energy affordable AND profitable, I think that industry will take off at least as fast as the computer industry did in the 80’s. I just wish I could peg which one will be the next Microsoft or Yahoo.

    Oh, and I have a refinery in my backyard, sort of (Yorktown, VA.) Gas is a couple cents cheaper at the stations that buy from them. It seems to be a pretty clean operation, too, although I don’t know how the folks that live very close to it feel.

  5. Western North Dakota may be coming in larger than the North Slope. Nothing stopping drilling there other than the low prices of the previous decades. Taxing it whenever the price drops is the way to move forward. Oil is a finite resource. Stop squandering it and make those alternatives possible. Costs will fall in time.

  6. My feeling is that drilling won’t hugely affect prices directly. The most useful thing it would do is to improve the balance of payments; more than half the trade deficit is oil, so more domestic oil production would reduce the deficit and strengthen the dollar – and would do so far more than anything that we could do with China, etc.

    Alternate energy sources like (non-food-based) biofuels would have the same effect if they were produced in the US.

    Strengthening the dollar would then lower the oil price somewhat (in dollars).

  7. Oil is running out. It’s that simple. Drilling in the US will buy us maybe an extra year or two, tops. We needed to be investing heavily in alternative energy 20 years ago. At this point, even if we started to do that immediately (and clearly we are not), we could not avoid a very harsh economic period brought on by exactly what is occurring right now. The answer is solar, wind power, public transit, redesigned infrastructure, centralized city living, local food production and product production, geothermal, and methane, just for starters, and we’re doing precious little to move in that direction. Hold onto your hat, you ain’t seen nothin’ yet.

  8. Believe me, you don’t WANT the politicians
    doing anything about the price of oil. It’s
    not the government’s place. And yes, it’s
    technically true we’re ‘running out’ of oil….
    each day there is less of it, but right now it’s
    still the cheapest, most plentiful energy
    source out there. We’ve just been spoiled by
    how much cheaper it used to be.

  9. I’m skeptical of those analysts that say we are running out of oil because we don’t know their motives.

    I also seriously doubt that the wide swings in the price of oil are based on fundamentals.

  10. I agree congress isn’t doing anything to help with the prices. I think that opening reserve wells and keeping them open for longer will help as well. It just takes way to long for something to pass in congress. I think it would be good to have an oversight committee or something because these oil concerns fluctuate too much, and too fast for congress.

  11. There is a ton of oil available in the US:

    “Adding in what’s available on privately held land, the figure rises to 139 billion barrels of oil, according to the government – more than the known oil reserves of Iran, Iraq, Russia, Nigeria or Venezuela, respectively.”

  12. Since this is all about supply, demand, and prices, I’m going to recommend a book to you all, Basic Economics by Thomas Sowell. If you want to know why a price is high, the answer is there. If you want to know why a good is in short supply, the answer is there.

  13. To your question about how much oil we have: according to the CIA, we have the 12th most of any country in the world, weighing in at 21.76 billion barrels of proved reserves.