Drill Here Drill Now Pay Less!
The Republican energy strategy can be be summed up in one (chant-able) phrase: “Drill Here, Drill Now, Pay Less”. Wow, that sounds like a great plan. But will it work?
Sadly, no. Even if we decided to “drill here”, there would be a minimum of 5+ years before any of that oil hit the market. Rome was not built in a day, and nor is the infrastructure required to bring new oil wells online. (Here’s a great example–there are a finite number of drilling ships capable of tapping the oil reserves off-shore. And they’re all booked for the next 3 years.)
So “drill now” doesn’t really mean “now”. Bummer.
Then there’s the question of “pay less”. Any Econ-101 student can tell you that if you increase supply and demand remains constant, prices will decrease. In the case of oil, we have a few problems that must be dealt with before we can “pay less”:
- Demand. Baring total global economic collapse, demand will continue to increase in the foreseeable future. China, India, Russia, Brazil, and a host of smaller nations are developing rapidly. They will probably want some oil as well.
- Supply. The best estimates from the Energy Information Administration put our new production at somewhere around 250,000 barrels a day. That does not represent a significant addition to the 16,000,000 barrels already being produced every day. (It’s about 1.5%) It’s unlikely that the oil markets will be significantly moved by an extra 250,000 barrels/day.
- OPEC. Just yesterday, OPEC decided that oil prices had fallen too far since their high and cut production by 500,000 barrels/day. (Stop here, read that number again, and compare it with the number from point #2 above.) If we think that domestic drilling will give us leverage over the giant oil cartel known as OPEC we are severely disillusioned.
Here’s a pretty graph that ought to put things in perspective:
So, I’ve made the case that “drilling here, drilling now” won’t result in “paying less”. What should we do instead?
Decrease demand.
That same Econ-101 student would tell you that decreasing demand with a constant supply will also lower prices. By golly, that sounds pretty good. How do we decrease supply?
- Improve automobile efficiency. The rest of the world figured out how to do it–even the American auto makers sell efficient cars in Europe! It’s just disgraceful that we’re still driving cars that get 25 mpg (the same efficiency as a Ford Model T)
- Invest in public transportation. We ship trillions of dollars to the Middle East for oil every year and get nothing but oil (and the subsequent pollution) in return. Investments in public transportation would result in local manufacturing and service jobs and would provide options for American travelers.
- Raise the gas tax. We know that demand for gas will drop as prices go up–we’ve already seen it happen. Why not help things along and recoup some of the money ourselves instead of shipping it all to foreign oil producers? The money could then be wisely invested in public transportation. Wow!
- Study the rest of the world. We seem loathe to look outside our shores for lessons on how to do just about anything. Sadly, transportation is one area that we’ve fallen far far behind the rest of the world. We need leaders who are willing to learn from our global neighbors.
The great thing about decreasing demand is that it’s compatible with all energy options. We can continue to use oil. We can start to use more natural gas. Or renewables. Or hydrogen. Or nuclear. And OPEC or China or Russia or anyone else can’t do anything to stop us.
Filed under economics, energy, environment, politics : Comments (2) : Sep 11th, 2008 by tadfad
September 12th, 2008 at 9:41 am
Again Tad Aristotelian logic is sooooo last century. We go with what our guts tell us, not our heads.
September 15th, 2008 at 8:50 am
I think the problem lies in what motivates people. Hearing Giuliani lead a ‘DRILL, BABY, DRILL’ chant sounds way cooler than any chant with the word ‘renewable’ in it.