Is Oil a Bubble? Part 3

In this last part of my series on the oil bubble, I am going to take a look at the supply side of the equation and touch upon why Congress might be as much to blame, or more so, than the oil companies at which they are currently pointing fingers. (In case you missed parts one and two, here are the links to them: Part 1  and Part 2.) For decades, the U.S. has had no real energy policy with which to hang your hat on. I remember in the early 1970s seeing funny commercials on television rallying people to get more active in conserving energy. However, conservation isn’t an active strategy for increasing supply.

Congress continues to search for scapegoats to blame for this mess, whether it is the big oil executives, financial speculators, or futures exchange regulators. However, they continue to show their failure to grasp the bigger picture, which is to increase domestic supply. Just over a week ago, the Senate refused to lift its ban on developing the oil shale in the Rockies, where estimates have put the amount of oil locked in this shale, stretching from the U.S. to Canada, at more than 1 trillion barrels. Can you imagine?

Congress has come up with a bevy of misguided “solutions,” including limits on CO2 output, restricting drilling on public land; windfall profits taxes on big oil, and trying to sue OPEC. None of these will help increase the supply that is needed to meet growing future demand. The primary solution should be tapping our own domestic supply sources, which remain out of reach.

The “windfall profit tax” is just another example of Congress’ inability to focus on supply and demand. Do you really think that the government would do something productive with those extra tax revenues if they got them? Moreover, why would you create a disincentive for the oil companies, when what we need is for them to invest more in exploration and drilling? A recent report from the International Energy Agency [IEA] warned of a potential global supply crunch, but said that it could result from the failure of governments – not private oil companies – to open up their lands for more exploration and development.

Reports out of countries like China and Brazil show they are getting the message. China reported 10 new oil discoveries last year, and Brazil has reported some huge finds this year, all of which bode well for those countries. Europe is also  increasing exploration in the North Sea, but our Congress is leaving billions of barrels untapped as it worries about the profits of the oil companies. According to Investors Business Daily, since 2002 the U.S. oil and gas industry has earned roughly $0.08 on each $1 of sales, which is about the same level as the U.S. manufacturing sector as a whole. It seems to me that the notion of windfall profits itself goes against the ideals of capitalism and free market economies.

I am not one to completely ignore the environment either. However, I have read that Louisiana, where many of our drilling and refineries are located, is one of the top areas for fisheries, and that the fish have thrived amid the drilling infrastructure. So let’s stop putting the environmental lobby’s campaigns ahead of the national interest of the rest of the U.S. consumers. If we had started drilling in the Arctic National Wildlife Refuge [ANWR] back in 1995, when President Clinton vetoed the proposal, we would be producing an extra million barrels of oil per day now.

The facts of the matter are that for the last 28 years, Congress has opposed our drilling in Alaska’s ANWR, which we know contains billions of barrels of oil. They have also prevented us from building any new oil refineries, prevented from drilling in the outer Continental shelf of the ocean, and halted the building of nuclear and clean coal power plants. Together, had these initiatives been promoted, they would have gone a long way toward alleviating the problems we are facing today.

The Institute for Energy Research estimated that the combined supply of oil contained in the sources mentioned above amount to as much as seven times the reserves of Saudi Arabia. This could be enough to meet current demand in the U.S. for hundreds of years. Moreover, The Heritage Foundation estimates that if full-scale production begins within five years, the U.S. could end its dependence on OPEC entirely by 2020. So Congress, what are you waiting for?

So ultimately, who is to blame for the oil bubble? To be fair, there are other factors that I have neglected to mention: China is likely hoarding resources, Iran is storing tons of oil in tankers, OPEC is running below peak production, and refineries are running below peak utilization rates as well. Remedying these situations would help, but their impact is less than the potential of the initiatives Congress has the power to green light. I can only hope that they somehow see the light and decide that it is more productive to start looking at solutions to the problem, rather than focusing on scapegoats.

As a last point, I probably could do a fourth part on the theory of “peak oil,” but I fear I am getting a bit verbose on the whole subject. Suffice it to say, I am not sure I believe in peak oil. Who is to say how much oil is still out there in previously hard to reach areas, or sources that were considered uneconomical to explore? However, these arguments lose sight of what really is important, and that is how long will oil supplies last? I think as alternative energy sources continue to become mainstream and as current transportation and industrial methods continue to use less energy for input sources, that we will deem the notion of running out of oil misplaced.

Comments

[guliamo:]

My friend,
I thought your analysis was impressive but dare say you're missing the point. oil isn't about supply, demand or available reserves.. Oil is about P-A-N-I-C..
Without Oil the Chinese and Indian economies (and many more for that matter) will simply come to a halt. China will pay any price to secure that black fluid that keeps factory machines working. You could find a huge Oil well in downtown NYC and the price will still remain the same. I guarantee Oil will reach $200 and beyond. The good news is that alternative energy is now fully funded and results will show soon, but the price of Oil will never drop.
Cheers.

2008 Jun 08 06:22 AM

[CLH:]

Kahn---Very good analysis. Almost the entire problem is caused by the democrats. If they continue to prevent drilling and the use of oil--millions will starve. The party is now entirely focused on man caused earth warming which is unproven. Neither sun power nor wind power is practical. The only power that can substitute for oil is nuclear which the democrats will not use.

2008 Jun 08 07:29 AM

[Boubou:]

Wrong. US can produce a little more but the market for oil overseas and the supply/demand balance overseas will still keep prices high for both local and foreign sources.

2008 Jun 08 09:01 AM

[john s. gordon:]

i see nothing in the above discussion about the vast amounts of syncrude available from liquefaction processing of illinois/west kentucky high volatile coal. we have lost 28 yrs of development of this resource due to the reagan cancellation of the demonstration plants program. colorado shale is good for jet fuel/diesel production except you need water for revegetation/reclamati... & there isn't any water.
> jack

2008 Jun 08 09:25 AM

[Relic37:]

Here is what I see...billions and billions of dollars of infrastructure in the USA known as "streets, roads, and highways" built exclusively for motorized transportation. This motorized transportation is almost exclusively powered by oil, in one of its refined states. These roads are not going away, regardless of the success of alternative fuels such as solar, nuclear, etc. There will still be vehicles, predominantly powered by oil, traveling these surfaces for at least another century. Hydrogen power may someday be feasible. Electric cars may reach practicality. Heck, we might even put sails on the roofs and grab some wind power. But cars, trucks, and buses (not to mention fire engines and ambulances) are here for the long haul. And we are going to HAVE to have sufficient oil for these things. Alternate energy sources will best work for powering the electricity grid for powering factories and heating and cooling our homes. Nuclear will have to play a part here, regardless of what Congress thinks. Unless they want to hold their sessions in the dark.

2008 Jun 08 09:30 AM

[pandora:]

I agree with a lot of what you are saying. Congress and Clinton could have provided the U.S. with independence from other countries. The need to drill oil on our own "turf" has gone ignored to the point of our own demise. Please do excuse the dramatization, however, I do not see people's wages increasing along with the surge of oil prices, along with the domino effect of rising prices everywhere. Congress can point the finger all they want, but if they do not allow the oil companies to drill on our land then how are we to become any closer to independence in the oil industry. However, the record high profits the oil companies are experiencing should go towards this goal and not out of the pockets of the American people, whatsoever.

2008 Jun 08 09:37 AM

[Mudeh2o:]

Higher energy prices do not exclusively come out of the pockets of the American people; remember, energy is an earthly commodity.

If only Congress would stop pretending to be Little Red Riding Hood while acting as the Big Bad Wolf, they might realize the opportunity for a two-fer: [1] vastly more energy production within U.S. confines, and [2] a rather large increase in high-paying jobs in the energy-producing areas.

It'll be too late for places like Miami Beach when the cost of energy prevents tourism from arriving and staying in condos too expensive to cool.

2008 Jun 08 10:44 AM

[Ozarker:]

What?

2008 Jun 08 11:16 AM

[Bergius:]

Regarding the comment by John S. above.
You are absolutely correct John. Gasoline can be produced today for about 25 cents per gallon using coal as a feedstock. We are all being raped by big oil and nobody is doing anything except complaining. See the post at seekingalpha.com/artic... for the nitty-gritty on this.

If anyone wants to contact me regarding building one of these carbon converters they can leave a message at the website contact.

2008 Jun 08 12:06 PM

[pwa canada:]

The solutions offered in this article are what have gotten us into trouble in the first place. We need a marshall plan for a sustainable energy policy:

1) Increase wind energy capacity in the US to at least 20% (currently 1%) over the next 20 years
2) Invest heavily into new transmission lines that can unlock wind energy in North Dakota and West Texas and other high wind areas in the US and Canada
3) Increase the amount of electrification in the economy (plug in hybrid vehicles, rail road electrification, increased public transit, geothermal heating and cooling, etc. etc. etc.
4) Invest in energy efficiency in buildings and appliances, require Leed certification in new building construction and provide government rebates for extra cost
5) Divert part of the defense budget to home grown energy rather than trying to defend middle eastern fossil fuel supplies that will never be stable and secure (just think what even 10% of the defense budget could do for home grown energy security)
6) Implement a Carbon Cap and Trade program (remember climate change is not going away without being addressed), that will reward the right kind of consumer behaviour and punish energy waste

These are just a few things that we can do NOW with existing technologies being produced right here at home and that will stimulate employment in the US and Canada and help us get out of the looming recession!
6)

2008 Jun 08 12:12 PM

[Paul Killinger:]

You are absolutely correct in your analysis- thank you! But I'll be disappointed if you don't keep posting to continue to remind us who the real culprits are. Obviously, we must not have gotten it yet.

Indeed, it's time we ALL stood up and declared ourselves, as has Vaclav Klaus in his book, "Blue Planet in Green Shackles." He details how we have arrived at this entirely self-imposed energy crisis, which no American economist had the brains or guts to write.

As for the Greens, they need to come out of hiding. Either they like the result of their gambit to boycott the use of U.S. energy reserves, which is now certain to result in $8 a gallon gasoline, millions of lost American jobs and the closure of entire industries, or they don't.

But let's not let them be so disingenuous as to blame the markets, speculators, the dollar, oil companies, OPEC, George Bush, the weather (...now, really!), or some other straw man for this inevitability. They caused it, they know it, and they should be proud.

So where are you, Greens? It's time to stand up and take a bow for turning the world's economy upside down. Don't be bashful now!

2008 Jun 08 12:31 PM

[Dr. No:]

The oil price bubble is a problem of financial paper demand and supply, just look a the relative proportions of physical to financial/index trading.
That said, don't ignore the greenhouse gas issue along the issue of increasing demand in Chindia. The first requires us (and anybody else) to wean of oil no matter how the bubble now turns out, the second will reignite long-term price increase and we have to become more effecient and think about where we actually really need petrochemicals. Arguably not in transportation (spare air travel), however in the petro-CHEMICAL industry. Arguably also not in fertilizer production. For those there are holistically better solutions. The benefit of the oil price bubble is that it drives energy effecient behavior, maybe for the wrong reason, but the outcome is positive overall. Just going ahead with oil exploration will increase CO2 output and that is the last we need.
I would have hopped for some more careful data reporting and analysis here.

Re: Cooling: Are you absolutely sure it is less effecient to cool houses in summer in the South vs. heat houses in the winter in the North? Do the math! Living in the North only works since mankind invented the fire and created greenhouse gases to go with it. Before, manking lived in the warmer regions. Somehow civilization started there and not at the poles.

2008 Jun 08 12:36 PM

[Paul Killinger:]

That's right, let's put our Congress in control of $5 TRILLION new cap and trade dollars. They'd spend it on everything BUT increased energy supplies. The truth is, they don't need to spend one thin dime on increasing U.S. oil and gas production... just get out of the way! And thank God the Canadian government doesn't boycott it's own energy reserves like we do... us Americans would be walking already!

2008 Jun 08 12:41 PM

[Paul Killinger:]

Some early civilizations were in warmer climes, others weren't. They must not have kknown about global warming.

2008 Jun 08 12:45 PM

[Paul Killinger:]

But you're right. The war is over and the Greens have won... this round, anyway. Let's hope alternatives and renewables save the day. If not, our economy as we know it won't survive, which we lead to another kind of war one not too distant day.

2008 Jun 08 12:50 PM

[Bergius:]

OK, time for a bit of a rant:
I'm paying nearly $6/gallon at the pumps.. so close that it might even be over $6 today 'cause, every day, it keeps going up. There is absolutely no reason for it other than everybody keeps plugging into big oil and nobody seems to want to make a serious move in any other direction.

Look, it would be nice for everyone if we could turn to hydrogen powered vehicles.. but that isn't really necessary. We can continue to drive our existing vehicles, including those big gas-guzling SUV's and Winnebagos for about 50 cents per gallon at the pumps if we just give our heads a shake and unplug ourselves from dependancy on Big Oil!

The reason we can do this if we want to is because we have the technology to do so.. if we have the will. The technology is sound and does not have to be expensive. Here's the solution:

Back in WW2 Germany didn't have any fuel for it's war machine. What they did have was the most brilliant scientists in the world. So their scientists set out to create a method of turning carbon.. any form of carbon, into gasoline and diesel fuel through hydrogen bonding. They did exactly that. Germany fueled it's war machine by making gasoline and diesel from coal and wood.

After WW2 America rounded up all the German scientists and set up test plants in the USA to master their technology. These plants ran for over 5 years. In 1949 the head of one of the US test plants announced that he could produce ALL THE UNLEADED 87-OCTANE GASOLINE AMERICA WANTED FOR 1.5 CENTS PER GALLON!

Oil was cheap and plentiful then. It could be delivered to the process direct from the source by pipeline. The German technology developed into the modern-day cracking process where 4 barrels of gasoline plus many related products are produced from one barrel of oil. Actually you don't need oil. Any carbon compound will do. The (Bergius) process converts 99% of carbon into fuel.

I know this process works. I had a forrest company and a mill in the '70's. I built a stage-1 Bergius wood waste converter and ran a stationary 4-cylinder Datsun gas engine directly from the output. This engine powered all the hydraulics at the mill. I made more than I could use so I also ran a free lottery for the mill workers on the surplus.

Contact me if you want to build one of these carbon converting units. They will use any carbon/hydrogen compound: Coal, wood, used tires, plastic bags, household garbage, yard waste, corpses, etc..

2008 Jun 08 01:24 PM

[Paul Killinger:]

Jordan,

I really am alot more optimistic than I let on, actually. The Greens and their minions in the Congress have been pursuing their stealth domestic energy boycott program for years. The public has only caught on to this duplicity recently, however, as the result of the skyrocketing price of oil and gasoline.

Longer term, both our oil and gas reserves and advanced energy technologies will combine to provide us more abundant and affordable energy supplies. The sad part is the millions of lost jobs and industries that are now certain to occur in the intervening years.

The trick, of course, is getting from here to there. And it is the continued efforts of engineers, scientists, entrepreneurs and people like yourself reporting about it whose hard work on our behalf will eventually get us there. Not the "Know Nothing" Greens, and certainly not the mass media pandering to the politicians who are responsible for our present malaise.

2008 Jun 08 01:49 PM

[mpkirby:]

Many of the comments here describe the issue in terms of win/loss. It isn't a sporting event.

It isn't "Greens' versus "Hummer-driving, anorexic soccer mom's"

The reason we have no reasonable energy policy is because no one is able to be reasonable.

We need:

- More drilling
- More conservation
- More nuclear
- Higher CAFE standards
- Tax structures that encourage investment and conservation.

We don't need:
- Whining conservatives bemoaning the environment for preventing them from driving their SUV's to Starbucks to get a latte.
- Whining liberals complaining that Oil kills otters, Nuclear radiates all, coal dirties snow, wind kills birds, solar ruins their "view of the valley".

Get over your pathetic selves, and sit down and negotiate!

Mike

2008 Jun 08 02:46 PM

[john s. gordon:]

thank you bergius (have pott & broche been heard from recently?) for mentioning the 1947-1952 bureau of mines program @ louisiana MO, i knew some of the people who had worked @ that facility. the cost forecasts for synthetic gasoline from that facility were so low, the houston oil millionaires were scared to death that the market value of their reserves in the ground would fall to zero. when DDE came into office they went to the white house & demanded 2 things: (1) imported oil at 25c/bbl had to be kept out of the country so that they could keep pumping their 2.50/bbl material, and (2) the BOM program had to be terminated forthwith. as we all know they got their wish, and today we are living (?) with the consequences. using 2020 hindsight (the best kind) we should have kept our strategic reserve in the ground & pumped arabia dry. instead we pumped the usa dry & let foreign consumers have the benefit of cheap arab oil.
> jack

2008 Jun 08 03:25 PM

[User 206943:]

This article misses the point entirely. A long term solution is not to increase production of a limited resource. We need to decrease demand and find alternatives.
We have the technology today for plug in hybrids that get 100 mpg. We have vast resources of natural gas that can be used for vehicles. Wind, solar and nuclear must also be increased as part of any long term solution.

2008 Jun 08 03:28 PM

[David Roskoph:]

Jordan,

The masses so deftly believe virtually anything; now the chant is environtmentalism uber allis. All the energy we need lies untapped so that we can give our grandchildren a pristine wilderness and an impossible debt. As my teeth lengthen, so too does my cynicism for all inforamtion "officially" distributed. If it weren't really happening, it would make a great sit-com in a more rational world. Thank you.

2008 Jun 08 05:12 PM

[Paul Killinger:]

Although oil is not a "limited resource" (...any more than it is a "fossil" fuel), it will still be increasingly expensive to find, produce, refine and distribute in the future. Therefore, it makes inestimable sense to develop and produce alternate technologies to operate our nation's vehicle fleet.

So if you think plug in electrics and hybrids, which must necessarily be supported by many more nuclear plants, new coal technologies, and replacing natural gas on the electric grid are good ideas, call your Senators. They're the only ones holding up the bandwagon on this parade.

And "ditto" to the guy who's bothered by whining conservatives. Let's all whine to Washington for a change and get them off a dime. My own opinion is, however, they have NO intention of advancing any of the above alternatives to oil and gas. As we observed last week, their goal now is to adopt a government run, $5 TRILLION cap and trade charade.

You guys better wake up before we're looking down the barrel at even more costly "Change we can believe in" next year.

2008 Jun 08 05:25 PM

[Carlibra:]

USA is using 25 million barrels/day of oil, what if 30% of that energy didn't have to be from oil but from solar power instead? Well, Germany is almost there. They already attained their target of 20% and are not going for 30%. Oil is limited, solar is not... it's that simple. Uneven global heating creates wind patterns.... that's free if you'll just tap it. Cars could be made to run on electricity. Isreal is adopting an interesting approach where by you buy a car and rent the battery. You'll just swap out your low battery for a fully charged battery. A company, ALTI, makes fast charging batteries. There is huge geothermal resource sitting right under Yellowstone Park, that's essentially free heat --> steam --> electricity. Huge water flow & tidal forces are at play in places like the Hudson River and the like, not to mention the Golden Gate. In addition, skys-crappers could tap into strong wind for power. OCTL.OB has a nano solar product to coat windows so that they make solar energy. The technology is out there but what we lack is imagination and adequate leadership. Why didn't Bush want to sign that energy bill that would have required energy companies to produce just 20% of their energy from renewable sources by 2020? Because he is only pro-oil and has no vision for this country, instead now we're in a crisis state. Adding 1 million barrels/day from Alaska won't really solve our problems if we're using 25 per day, it will help only somewhat... Sugar cane is 10x more effective as corn in making ethanol, the Brazilians know that, why don't we? As for me, I'm using my bicycle 95% of the time and in my next long trip I'm taking a bus and train.

2008 Jun 08 05:29 PM

[pharma:]

The old French saying: Each country has the best government its people deserve to have. No better and no worse.

It is just stupid to blame the Congress for high gas prices and dependence on foreign and unfriendly energy suppliers.

The US Congress just reflects the overall bankruptcy of the entire US way of life. Its moral, intellectual and economic values are in disarray and in crises. The degradation started at Lyndon Johnson "Great Society", and started to accelerate during both Clinton and G. W. Bush administrations.

The American consumer-consumption driven economic model is nothing more or less as a parasitic way of life using somebody else money without any intention to pay it back.

For the last 40+ years, America lived well above its means. It is a very long time; it could not last forever [similar to the Soviet Communist model], and eventually the time is up.

Just to blame specific individuals in the Congress and in the Administration is stupid. These scoundrels were elected by American people.

Now, America is about to start a transition to its new way of life. It will not be a painless transition. Just look at Russia. Ten years ago, Russia was in a terrible crisis. Now, it is one of the most dynamic and growing prosperity society.

America will survive. It will take some time. America will be a very much different country.

2008 Jun 08 05:55 PM

[Paul Killinger:]

Wow, you guys are even more down on our survival prospects than I am. Well, the future is daunting, and maybe you're right. Fortunately, I grew up in an era of cheap energy (... gas was 24.9 cents at the pump), so I'm okay. But that's not so for kids today.

Indeed, it was a famous Frenchman, de Toqueville, who said when touring 19th century America, our democracy would do great until we realized we could vote ourselves the proceeds of the treasury. It's possible we already have. Good luck to each of you!

2008 Jun 08 06:33 PM

[billp37:]

"3) Increase the amount of electrification in the economy ..."

There may be problem with electrcity production TOO.

www.prosefights.org/pn...

2008 Jun 08 07:18 PM

[ari5000:]

solar / wind --

These are great ideas but the answer probably lies within automobiles since 90% of the gas we used is for transportation. Wind and solar won't put a big dent in prices.

Push CNG cars, plug ins... and really good battery-powered cars and then gas prices will drop dramatically.

Seeing as how the last time Bush had anything to say about automobiles he was AGAINST raising fuel standards... well, every time I see someone blaming Democrats for balking at drilling -- I just laugh. Look at the value of the dollar / value of oil during his reign.

These will be called the Lost Years for America.

I am optimistic change will come, hopefully before things really get ugly.

2008 Jun 08 08:41 PM

[MaoXian:]

Man-made climate change is only "unproven" if you restrict your reading on the subject to propaganda funded by ExxonMobil and others. For a summary of the consensus amongst actual scientists see here:

www.logicalscience.com...

2008 Jun 08 09:54 PM

[Carlibra:]

You'r 90% figures is incorrect. We use 30% for transportation, 30% for food production and then 30% for plastics, chemicals, including fertalizers. We don't need to only use hydro-carbons to make electricity, the biggest nuclear reactor of all is above us giving it to us for free, just look up. Thermal energy can be accessed from below. The world supply is on the decline while demand is exploding. Oil is not in the future and the transition off of it will take place and it's going to be painful at first but Germany has set a good example; already past 20% renewable energy produced from the sun.... going for 30% now. That's the kind of leadership we need in the USA.

2008 Jun 08 10:25 PM

[discov:]

The problem is that we are socialist. Our government sucks and socialism sucks. I know first hand, I live in America.

2008 Jun 09 02:59 AM

[pachanguero:]

Damn the greens they are just socialists. Damn the Democrats they are socialists and racists.
Damn the Republicans they have no balls to stand up to greens or the Dems.

Obama is like deer in the headlights. He will soon be run over and chased back to his racist chruch.

Oh and damn Jesus too. He is a liberal hippy.

2008 Jun 09 07:01 AM

[pachanguero:]

Oh and oil will be $200 by the end of the year,

2008 Jun 09 07:02 AM

[veeblefetzer:]

Destroying the environment to produce more and more oil is like burning your house down to stay warm in the winter. It may feel good now, but the future consequences are not good. And if we produce more oil at lower prices, people will continue to buy Hummers and commute to work from distant suburbs driving alone in their Hummers. Higher gas prices are finally leading people to think about their driving habits and buy more fuel efficient vehicles. I think while high oil prices hurt in the short run, in the long run they will prove beneficial.

2008 Jun 09 07:36 AM

[jkhops:]

opec is a cartel. that means they have no competition. they set the price. supply and demand don't matter in the case of a monopoly, or a cartel

2008 Jun 09 09:20 AM

[StingWest:]

"Destroying the environment to produce more and more oil is like burning your house down to stay warm in the winter. It may feel good now, but the future consequences are not good."

Well said, Veeblefetzer! This article was incredibly short-sighted!

2008 Jun 09 09:22 AM

[windy city man:]

I agree with user206943. Any amount of domestic exploration and production will not end the speculation and high prices that the oil cartel enjoys. Letting these companies merge was a big mistake. Now they want to use the high prices to wreck our environment and you're shilling for those rascals.

More solar and wind powered energy and a big tax on gasoline to help these industries (not owned) by big oil is the answer.

2008 Jun 09 09:40 AM

[RWB:]

CLH wrote: "Kahn---Very good analysis. Almost the entire problem is caused by the democrats."

As someone who supports E&P in Anwar and other currently off-limits areas, I find this kind of talk disengenuous. It skips over the fact that Republicans controlled both houses of Congress and the executive branch for six years--if they had really really cared about ANWAR drilling, they could have forced it through. Especially after 9-11.

For whatever reason, it has not been a high priority for Republicans until now--when it can conveniently be used as a talking point to blame Democrats for high gasoline prices. I don't want to turn this into a political debate, but it seems that if you are looking for people to blame for keeping ANWAR undrilled, you have to look at both parties, not just the Democrats.

2008 Jun 09 09:46 AM

[Katokryle:]

As a former offshore oil field worker, i fully understand how capital intensive and risky the development ultradeepwater hydrocarbons is and i have seen that exploration companies are plowing loads of cash into advanced seismic and geological testing efforts globally...with the same result! THERE IS LESS OIL IN THE GROUND AND WHAT IS LEFT IS A REAL PAIN TO EXTRACT!

it doesnt just take lots of cash, it takes lots of luck and weather, a concentration on safey and availability of equipment, talent, management, supplies, innovations and constant vigilance over H2S gas and wrecks and accidents. (not to mention the effort and resolve it takes to drill in Nigeria or Venezuela where people are doing everything to derail your operation!

simply put, half the world's oil is burned up, and the other half is a devil to produce. look at the Big Oil capital budget expenditure over time and its replenishment rate. the ante is way up and the risk of dry holes is way up too. there will be a point when the pertoleum extraction will be a very narrow game, with few participants with lots of risk capital. other E&P companies simply wont channel their capital there anymore as Plug and abandon costs become eminent.

2008 Jun 09 10:02 AM

[fivepointnine:]

politics aside, we know how to gain our energy independence, most everyone I have listened to, or read about knows, so why are we not doing it? It seems that the whole country knows what to do, but congress refuses to take action. If the ANWR bill had not been veto'd by Clinton in '95 we would not be having these problems today, or they would be at a much lesser extent.

2008 Jun 09 10:04 AM

[Mmarrkk:]

RWB: I disagree completely. While the GOP was in charge of the House and Senate, they did not have a wide enough majority to get things through the Senate where 60 votes are needed. Plus, 2 or 3 of the GOP Senators are actually socialist Demoncrats in disquise (thank you Ms. Snow and others). So a majority doesn't always mean control.

Look at the Democrats currently in control of Congress. They have majorities but have failed to deliver on almost all of their "promises" from the last election. And don't blame Bush; they haven't sent many bills to him to veto. They just can't lead. Both parties suffer within our system as we have never been able to give up a partie's position to reach consensus.

2008 Jun 09 10:33 AM

[Tom B:]

"Although oil is not a "limited resource" (...any more than it is a "fossil" fuel),"

You are an idiot.

2008 Jun 09 12:42 PM

[Tom B:]

Two points: I agree with KatoKryle-- the easy oil is gone.

I agree with ari5000 "Seeing as how the last time Bush had anything to say about automobiles he was AGAINST raising fuel standards... "

The Dems need to take a little blame regarding CAFE, also, though.
It has been obvious from the first day that oil was pumped out of the ground that it would eventually run out. And yet-- where was the Gov't and CAFE when SUV's roamed the Earth, like the dinosaur's hydrocarbons in theri gas tanks? The GOP has this religion about never interfering with business (especially businesses with big lobby groups), and the Dems were afraid to be perceived as doing anything to harm the highly-unionized car industry.

Guess what? The FREE MARKET is now punishing Ford, etc. They are dropping the Hummer and other gas-guzzlers. The only problem is that the world has much less oil now than it would if the Gov't had taken a long view instead of catering to PAC's.

2008 Jun 09 01:07 PM

[Tom B:]

Two points: I agree with KatoKryle-- the easy oil is gone.

I agree with ari5000 "Seeing as how the last time Bush had anything to say about automobiles he was AGAINST raising fuel standards... "

The Dems need to take a little blame regarding CAFE, also, though.
It has been obvious from the first day that oil was pumped out of the ground that it would eventually run out. And yet-- where was the Gov't and CAFE when SUV's roamed the Earth, like the dinosaur's hydrocarbons in theri gas tanks? The GOP has this religion about never interfering with business (especially businesses with big lobby groups), and the Dems were afraid to be perceived as doing anything to harm the highly-unionized car industry.

Guess what? The FREE MARKET is now punishing Ford, etc. They are dropping the Hummer and other gas-guzzlers. The only problem is that the world has much less oil now than it would if the Gov't had taken a long view instead of catering to PAC's.

2008 Jun 09 01:07 PM

[Just Say Whoa!:]

Prediction:

In the future, perhaps as soon as 2010, American consumers will be buying and driving FRENCH cars on American streets and highways.
zeropollutionmotors.us/

These FRENCH cars will comply with 100% of American safety standards.

These FRENCH cars will be compressed air hybrids.

Under 35 miles per hour, these FRENCH cars will use 100% compressed air, which can be filled up for as little as $2.

Over 35 miles per hour--up to 95 miles per hour, these FRENCH cars will use gasoline--but get this...

...will get 106 miles per gallon.

That's right, 106 miles per gallon.

You see, my friends, these cars were designed by the FRENCH.

Not stupid Republican Detriot Car executive a@@holes.

The best part about the future is...NOT A SINGLE REPUBLICAN WILL GET A SINGLE PENNY from this!

Not one!!!!

WAHHHHHHHHHHHHHHHHOOOO...

2008 Jun 09 03:33 PM

[ravenquork:]

This article might have had some value if it had been written in the 1930's. Today it is just a rehash of some of the poorest policy thinking of the last 50 years.
to wit:
1. "For decades, the U.S. has had no real energy policy with which to hang your hat on." Yup, truly a political failure of BOTH parties
2. "...which is to increase domestic supply. " Unless you are a proponent of nationalizing the oil companies, there is no such thing as domestic supply of oil. All oil is sold on the world market at world prices.
3. "...bevy of misguided “solutions,” including limits on CO2 output, restricting drilling on public land;" Limits on CO2 misguided? Unless you belong to some misguided cult that has voluntarily given up all claims to rational thought or have your head buried in the sand somewhere, CO2 emissions are a huge threat to world stability; economic, political, and social. Restriction s on drilling on public lands is a problem? Again, there is no such thing as "domestic oil" Any oil produced in the US is sold on the world market at world prices. Any additional production here will be offset by production reductions elswhere by the many oil producing nations that are less than friendly to US interests.
4. "The “windfall profit tax” ... why would you create a disincentive for the oil companies," Really? The Big Oil companies aren't going to explore for 138.00 dollar oil because they are paying taxes on their profits? This isn't even worth further comment.
5. The Institute for Energy Research Anyone checkout their web site? One thing they don't list is who funds them. Looks like just another fake "grassroots origination's" trust level = zero
6. The Heritage Foundation? If memory serves correctly wasn't this the same origination active a few years back in the campaign to convince us that smoking was actually a good thing. trust level = zero
7. "I can only hope that they somehow see the light and decide that it is more productive to start looking at solutions to the problem, rather than focusing on scapegoats." I couldn't agree more. I am a firm believer in free markets, but if we had spent a few trillion tax dollars producing cellulostic ethanol, installing distributed solar and wind facilities, and developed practical CO2 sequestering facilities so that we could utilize the cheap coal that the US is awash in, instead of destabilizing world oil supplies by invading Iraq, we might be close to energy independent already. Or we could have bought 70,000,000 domestically produced energy efficient cars (yeh, yeh I know, supply and demand make this impossible, but the example still serves to make a point) and saved 35,000,000,000 gallons of gas. One thing for sure, we will never archive energy independence or even stability by drilling in INWR
-
The fact that this article mimics others that keep cropping up on the web that contain little or no usefull information, other than rehash a particular brand of conservatism, this article really belongs in a section on paid right wing commentary and not masquerading as a financial article.

Disclosures: Long OXY, REXX, JRCC, ROYL, SOLF, CSIQ, JASO, APWR
40 year member of the Republican Party, had my fill of mindless pap , soon to become independent

2008 Jun 09 03:51 PM

[SallieWorld:]

I say booyah! to Congress working in the dark (Relic37) and to Mr. Bergius! Congress is so in the dark it's scarey and has been for a long time.

Mr. Bergius, you need to find someone with big bucks (T. Boone Pickens is investing 10 Billion in wind this year for BP), maybe he would be interested.

The USA is definitely it's own worst enemy. Incredible.

2008 Jun 09 04:13 PM

[jstratt:]

Stay optimistic! Our country is starting to demand an energy policy from congress and we will get one. That will change alot of things quicker than many think it will.

The Oil price problem is not that we dont have current supply in my opinion as much as extrapolating increasing demand forward with a static supply curve makes investors and governments worldwide forecast long term price increases.

I saw the same thing in 1980 when I worked in the Oil industry in Houston. People scoffed at the idea that Oil could do anything but go up. It was a demented soul who would even argue such a possibility. Then came an Oil glut! People hooted and laughed when someone would mention that. Six months later they were all unemployed.

Energy is available in unlimited supplys in many forms. Oil is available but the price to get large quantities is an open question.

In the end I think oil will drop below $80 a barrel. However that wont be until we get an energy policy and take steps to become independent. My fear is that we will then lose our resolve to have a meaningful energy policy.

2008 Jun 09 11:30 PM

[DaveinHacke...:]

Mike and some others touch on a key point: America is poorly governed. It's that simple. We may deserve it, but it still sucks. It's not a left-or-right issue: Brazil is led by a left-of-center president and he doesn't try to stop Petrobras from drilling off the coast of Rio. Why would he? That would be stupid. Brazil manages its natural resources better than we do. So does Chile. Maybe because both of those countries had smart policies enacted when they were under military oligarchies.

In November we will chose between two men, neither of whom knows anything about energy or the private sector, and neither of whom is willing to drill one hole in the frozen wasteland we call ANWR.

Instead of letting it frustrate you, profit from our poor government. Buy attractively priced oil stocks (these three I own, BPT, EGY, and XOM, are all trading at EV/future earnings estimates of ~9x). Invest in better-governed countries like Australia and Brazil. Invest in American manufacturing companies tied to the global boom in infrastructure and natural resources. Avoid banks and any company that relies on the U.S. consumer, except maybe the retailers with the lowest prices, like COST and WMT.

Save your money, invest smartly, and you'll be richer on the other side of the tough times we're going through.

2008 Jun 10 01:57 AM

[Tom B:]

"Mike and some others touch on a key point: America is poorly governed."

Our Constitution, though a pivotal document, heavily favors a two-party system. I think that is a big part of the problem. Two is a nice, small number-- just two parties to bribe and lobby.

2008 Jun 10 08:28 AM

[omega:]

The author writes "I am not one to completely ignore the environment either. However, I have read that Louisiana, where many of our drilling and refineries are located, is one of the top areas for fisheries, and that the fish have thrived amid the drilling infrastructure."

Jordan: Good article, but you're radically off base here. Fish in the Gulf may be thriving, but any human concerned about health shouldn't be eating them. Gulf fish and seafood are loaded with toxic chemicals and heavy metals, thanks largely to the oil development in the area.

In contrast, the waters of Alaska are still pristine (save where residual oil sludge from the Exxon Valdez still permeates the beaches of Prince William Sound), and the salmon produced here are some of the healthiest food produced on this planet. Out salmon runs are thriving, too -- unlike the salmon of the West Coast and most of the rest of the world, which have been annihilated by industrial development. Drilling for oil in ANWR or Bristol Bay would most certainly be the first phase of the destruction of Alaska's healthy wild ecosystems.

I want to profit from my energy stocks as much as anyone, and besides I benefit from Alaska's annual oil permanent fund dividend -- to say nothing of the absence of a state income or sales tax -- but I live here because the air is clean, the wild food is pure, the wilderness is close at hand and the quality of life is so high most of the rest of the world can't even conceive of it. I don't want our addiction to an obsolete, environmentally destructive and politically suicidal oil industry to continue devastating my home or the rest of the planet. It's time to start thinking outside the box and develop our vast renewable energy resources. They can be the foundation of an economy much stronger and more stable than our current oil-dependent house of cards.

2008 Jun 10 10:48 AM

[Don'tBeSelfish:]

Yeah for User 206943!!! Spoken like someone who understands economics and engineering. A true renaissance man or woman!

2008 Jun 12 03:04 AM