Posted by: Dennis Pillion | August 14, 2008

Offshore drilling merely a safety blanket for Big Oil profit margins

I was standing in line at the grocery store yesterday, and the conversation turned strangely to our nation’s energy policy. I can’t recall exactly how we got on that topic, but there I was standing between the drinks cooler and the candy rack hashing out the pros and cons of drilling for oil in ANWR and off America’s coastline.

The gentleman ahead of me in line seemed to believe, as do a disturbing number of Americans, that there’s a magic oil pill lying in wait just below our shores or just inside that herd of caribou in the wildlife refuge that will make all our energy problems go away. After all, it sounds good, doesn’t it? Gas is expensive, we have more oil. Problem, solution.

Unfortunately, it’s not that simple, at least not to the House Committee on Natural Resources. Their June 2008 report, titled “The Truth About America’s Energy: Big Oil Stockpiles Supplies and Pockets Profits states pretty clearly:

Since the 1990s, the federal government has consistently encouraged the development of its oil and gas resources and the amount of drilling on federal lands has steadily increased during this time. The number of drilling permits has exploded in recent years, going from 3,802 five years ago to 7,561 in 2007.

Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%, yet gasoline prices have also risen dramatically (Figure 1) contradicting the argument that more drilling means lower gasoline prices. There is simply no correlation between the two.

Gee, in George W. Bush’s administration alone, oil companies started getting 361 percent more permits and that number has almost doubled since we re-elected him in 2004? I’m shocked. Well, at least that solved our oil crisis, right? Didn’t it?

No? Maybe that’s because the oil companies don’t have time or equipment to drill the land for which they already have drilling leases. Courtesy of that same pesky report:

Combined, oil and gas companies hold leases to nearly 68 million acres of federal land and waters that they are not producing oil and gas (Figure 4). Oil and gas companies would not buy leases to this land without believing oil and gas can be produced there, yet these same companies are not producing oil or gas from these areas already under their control.

If we extrapolate from today’s production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.

That would nearly double total U.S. oil production, and increase natural gas production by 75%.  It would also cut U.S. oil imports by more than a third, and be more than six times the estimated peak production from the Arctic National Wildlife Refuge (ANWR).

That’s courtesy of The House of Representatives, not me or The Huffington Post.

Clearly, the reason for high gas prices and large oil exports is not that we don’t have enough drilling leases floating around out there.

The problem is that all Congress can do is lift a moratorium on drilling. Congress doesn’t even grant leases to oil companies, that’s the Bureau of Land Management. Congress can’t force the drillers to put a rush on the job and the leases will doubtless have a long, if not infinite, lifespan. Imagine this, for a second, from the perspective of an oil company:

You’re pulling in record profits, year after year. Demand for your product is sky high and will stay that way for the foreseeable future. You’ve had a beer buddy in the White House for the past seven years, making your life better every step of the way, and you have 68 million acres of land just waiting for you to drill. You need one last reserve, one last score before a potential change of administration in November. After all, why settle for a ridiculous amount of land to exploit when you can have even more?

Say you get the leases. Are you going to rush to invest billions of dollars in new drilling equipment, refineries, hire more engineers and other employees just to rush the first barrels into the marketplace and decrease the price of that black gold you’re pumping out of the ground? Of course not. You’re going to do exactly what the oil companies are doing with those other 68 million acres. Sit on them. Stash that land away for a rainy day, use the drills and resources you already have, but use them when you’re good and ready.

Sure there are plenty of documented reports that the drilling won’t help immediately. John McCain even said so himself. One of the most compelling arguments came from this L.A. Times story, in which Cindy Shogan, executive director of the Alaska Wilderness League, had the following to say:

“What he failed to mention was data released recently by his own Department of Energy that shows, unequivocally, that drilling in the arctic refuge will have no effect on today’s high gas prices. At peak production, two decades from now, the amount of oil speculated to be available in the refuge would lower gas prices by less than 4 cents a gallon. Basically, the president wants to destroy one of our last pristine wilderness places to save us a few pennies 20 years from now.”


Regardless, it appears the country is bleeding from its jugular and the Bush-McCain tandem have proposed to build a band-aid factory that will begin producing in 5 to 10 years. And even worse, they’re promoting offshore drilling as the solution to the problems Americans are experiencing now. (Bush also wants to drill in ANWR, while McCain is against the idea, if only because he was so forcefully in favor of protecting the area in his past life.) It’s just another example of big oil dollars being the top concern of our commander-in-chief and the guy who hopes to be the next in line. It’s pretty frightening stuff for all of us who don’t run oil companies.



  1. […] Ha! So you admit that offshore drilling alone won’t affect prices at the pump! […]

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