Decision ‘08

Offshore Drilling: Yay or Nay?

Okay, I know it’s not politically correct to be “against the environment” at a time when global warming is increasingly accepted by most people on both sides of the aisle. However, though I know they are taking a ton of flack for it, politically, I think John McCain and President Bush are right - it’s time to increase our offshore drilling. At a time of incredibly painful energy cost increases, and in the global context of declining proven reserves in some of the world’s most productive existing fields (not to mention the increasing nationalization of oil assets by countries unfriendly to us), the moment is now.

And guess what? Most Americans - even Americans who describe themselves as liberal - agree with me, at least according to this Rasmussen survey:

Most voters favor the resumption of offshore drilling in the United States and expect it to lower prices at the pump, even as John McCain has announced his support for states that want to explore for oil and gas off their coasts.

A new Rasmussen Reports telephone survey—conducted before McCain announced his intentions on the issue–finds that 67% of voters believe that drilling should be allowed off the coasts of California, Florida and other states. Only 18% disagree and 15% are undecided. Conservative and moderate voters strongly support this approach, while liberals are more evenly divided (46% of liberals favor drilling, 37% oppose).

Sixty-four percent (64%) of voters believe it is at least somewhat likely that gas prices will go down if offshore oil drilling is allowed, although 27% don’t believe it. Seventy-eight percent (78%) of conservatives say offshore drilling is at least somewhat likely to drive prices down. That view is shared by 57% of moderates and 50% of liberal voters.

Daniel Henninger recently took America (and McCain) to task for its no-drill mentality:

Brazil discovered only yesterday (November) that billions of barrels of oil sit in difficult water beneath a swath of the Santos Basin, 180 miles offshore from Rio de Janeiro and Sao Paulo. The U.S. has known for decades that at least 8.5 billion proven barrels of oil sit off its Pacific, Atlantic and Gulf coasts, with the Interior Department estimating 86 billion barrels of undiscovered oil resources.

When Brazil made this find last November, did its legislature announce that, for fear of oil spills hitting Rio’s beaches or altering the climate, it would forgo exploiting these fields?

Of course it didn’t. Guilherme Estrella, director of exploration and production for the Brazilian oil company Petrobras, said, “It’s an extraordinary position for Brazil to be in.” Indeed it is.

At this point in time, is there another country on the face of the earth that would possess the oil and gas reserves held by the United States and refuse to exploit them? Only technical incompetence, as in Mexico, would hold anyone back.

But not us. We won’t drill.

California won’t drill for the estimated 1.3 billion barrels of recoverable oil off its coast because of bad memories of the Santa Barbara oil spill – in 1969.

We won’t drill for the estimated 5.6 billion to 16 billion barrels of oil in the moonscape known as the Arctic National Wildlife Refuge (ANWR) because of – the caribou.

…Some portion of the current $4-per-gallon gasoline may be attributable to the Federal Reserve’s inflationary monetary policy or even speculators. But we can wave goodbye to the $1.25/gallon gasoline that in 1990 allowed a President Bush to airily lock away the nation’s oil and gas jewels. This isn’t your father’s world of energy. New world powers are coming online fast, and they need energy. We need to get back in the game.

The goal shouldn’t be “energy independence,” a ridiculous notion in an economically integrated world. It’s about admitting the need to strike a balance between the energy and security realities of the here-and-now and the potentialities of the future. Some of our best and brightest want to pursue alternative energy technologies, and they should be encouraged to do so, inside market disciplines. But let’s at least stop pretending the rest of the world is going to play along with our environmentalist moralisms.

The Democrats’ climate-change bill collapsed last week under the weight of brutal cost realities. It was a wake-up call. This is the year Americans joined the real world of energy costs. Now someone needs to explain to them why we – and we alone – are sitting on an ocean of energy but won’t drill for it.

You’d think the “national security” nominee, John McCain, would get this. He’s clueless – a don’t-drill zombie. We may mark this down as the year the U.S. tired of being a serious country.

Well, perhaps McCain read the article, because he’s changed his tune…and sorry, Barack, a ‘windfall profits tax’ is not going to do anything at all but make people feel good about socking it to those mean ol’ oil companies. I don’t want the oil companies penalized - I want them to take those giant profits and put them to use discovering new reserves…that’s the kind of policy we need to pursue, even as we also devote resources to the coming, inevitable “post-oil” economy. It’s not an either-or: we need to pursue both tracks, and get serious about our energy resources…

45 Responses to “Offshore Drilling: Yay or Nay?”

1 Martha Says:
June 17th, 2008 at 8:23 pm
I think we need to go for the off shore drilling. It is past time to get some help with this situation!
2 Scott Says:
June 17th, 2008 at 11:10 pm
How long will it take for us to get the associated relief at the pump? And how much will that relief be?
3 Jacques Distler Says:
June 18th, 2008 at 12:09 am
How long? About a decade.

How much relief? Probably not much. Oil is a worldwide commodity, and the percentage increment to the total worldwide supply, from US coastal reserves, is likely to be small. Meanwhile global demand is going to increase sharply over that decade.

But, hey, let’s not expect McCain to grasp the details of his own energy policy.
4 Chris J. Breisch Says:
June 18th, 2008 at 6:50 am
Who cares how long it takes? That’s a ridiculous argument and one the left has gotten away with for far too long. We were told in 1995 by Bill Clinton that drilling in ANWR was pointless because it would take ten years before it became useful.

Well,if he’d authorized drilling in ANWR in 1995, do you think that oil would be anywhere near $140 a barrel today?

That sort of short-sighted thinking is exactly what Obama claims to be against, but it’s exactly what he does every day.

Drill Here. Drill Now. Pay Less.

We are potentially the most oil rich country in the world, yet we import almost 2/3 of our oil every day. Why is that?

And then we complain about having to spend so much time and money on wasted efforts to stabilize the region that drives our economy. It seems to me that if you’re really opposed to the war in Iraq, and really think we should be tougher with the Saudis or just think we should get out of the Middle East entirely, you should be for anything that gets us closer to energy independence.

Newt on gas prices
5 Jacques Distler Says:
June 18th, 2008 at 7:34 am
Well,if he’d authorized drilling in ANWR in 1995, do you think that oil would be anywhere near $140 a barrel today?

All other things being equal?

Yes.

The amount of oil that ANWR would produce is way too small to significantly affect the worldwide price of oil.

If you have a good argument for drilling in ANWR, make it . Peddling fantasies that it would lower the price of oil is not an argument. (Not that Newt and his brethren are shy about peddling fantasies.)
6 Clint Says:
June 18th, 2008 at 9:08 am
Jacques-

It’s pretty well established that resources like Oil and Food — i.e. necessities — have fairly inflexible Demand, so that even (relatively) small changes in Supply can have quite significant changes in price. This is why OPEC could exert such power back in the ’70s– cutting the world’s supply of oil by as little as 5-10% can dramatically increase the free market price, more than making up for the lost revenue from cutting their output.

For comparison, the entire 1973 oil crisis — with it’s quadrupling of oil prices — resulted from a decrease in supply to the U.S. of about 1.2 million barrels a day — about 2% of the world consumption and less than 10% of U.S. consumption. And that was with no actual decrease in world supply.

Again in 1979, a decrease in world supply (mostly from Iran) of about 4% more than doubled the price of oil.

As to ANWR, an estimated 800,000 barrels a day (with a total reserve on the order of 10 billion barrels) is nothing to sneeze at. It’s about 4% of the total U.S. consumption of oil, and 1% of total world consumption. In other words, adjusted for the increase in U.S. and World consumption since the ’70s, it’s just about half the change in supply that caused a quadrupling in price and massive shortages and rationing.

Were the oil crises of the 1970s also paranoid fantasies of the radical right?
7 Ryan Says:
June 18th, 2008 at 10:36 am
I am generally in favor of expanded drilling. I think it’s barely a Band-Aid on the wound, but I don’t think there’s anything obviously wrong with pursuing it. We do need to think seriously about how to get to alternative fuels and not pretend that ANWR and offshore drilling will save us, but this is one issue where I think the left is basically wrong and the right is basically, well, right.
8 peter Says:
June 18th, 2008 at 12:19 pm
1) Clint: demand for oil is inelastic in the short term, but not in the longer term. The oil embargo of the 1970’s led to 55 MPH speed limits and the Ford Pinto (throw in disco, and you know why that decade was so awful). People find ways to use less gas, and hence there is lower demand over time. Whether this takes the form of biofuels, hybrid cars, public transportation, ride-sharing, or bicycles remains to be seen. However, one way or another demand will be reduced over time, which will ultimately lead to lower commodity prices.

2) I wouldn’t expect George Bush to mention the turmoil in Iraq as a root cause of high oil prices, but it’s hard to escape the fact that the damage to their oil industry combined with the risk premium that has been built into the price of crude had a significant effect on raising the cost of gas. I’m surprised that Obama hasn’t raised this yet.
9 Jacques Distler Says:
June 18th, 2008 at 12:56 pm
For comparison, the entire 1973 oil crisis — with it’s quadrupling of oil prices — resulted from a decrease in supply to the U.S. of about 1.2 million barrels a day — about 2% of the world consumption and less than 10% of U.S. consumption. And that was with no actual decrease in world supply.

Let’s get our facts straight.

1) During the 1973 crisis, OPEC (which controlled a much larger fraction of total world oil production than they do today) cut back production by 12%. (In September 1973, before the embargo, they produced 33 million barrels/day. The embargo started in late-October. Production dropped to 29 million barrels/day in November 1973. In April 2004, after the embargo ended, OPEC production returned to 32 million barrels/day.)
2) Total world oil production dropped by 7% during the same period.
3) In response, crude oil prices doubled, not quadrupled.

1% of world oil production is not to be sneezed at, but it’s not going to cause the magnitude of price movements you saw in during the 1973 crisis — not just because the amount is too small, but because (as Peter points out), demand is far more elastic over the course of a decade than it is over the space of a couple of months.
10 Gulf Coast Bandit Says:
June 18th, 2008 at 2:14 pm
It will also help our trade imbalance, thereby strengthening the dollar.

And as we go more and more green with alternative sources of energy (bacterial crude oil, in addition to the wind/solar/ethanol stuff), demand for crude out of the ground will decrease. Decrease in demand + increase in supply = lower prices.
11 too many steves Says:
June 18th, 2008 at 4:08 pm
A very good way to drive product development in the area of alternative energy is to NOT increase oil reserves and supplies. The more costly oil is the more viable alternative, expensive, energy sources become.
12 Mark Says:
June 18th, 2008 at 7:23 pm
Yeah, but at the expense of the American consumer…the alternative energy sources will come with time - they will have to. Peak oil may or may not be here yet, but it will be, probably in our lifetime. I agree with Jacques that the effect on the current price of oil would be minimal - but I also agree with Chris that this argument (any change in the price would be up to a decade in coming) is the same one peddled 10 years ago, and 10 years from now it’s going to look even more shortsighted…
13 Jacques Distler Says:
June 18th, 2008 at 9:47 pm
Mark,

My first task was to dispose of the ridiculous argument that exploiting these previously untapped deposits of oil would bring down the price. Having (I hope) dealt with that canard, it’s time to turn to the question of whether, in fact, we should start exploiting them.

I have absolutely no doubt that we will eventually extract oil from ANWR, the coast of California, oil shale, the Athabasca Tar Sands, …

The only question is … when?

The world’s demand for complex hydrocarbons is not going to go away (at least, not entirely). The only reason these sources are not being exploited already is cost. In some cases (oil shale, tar sands), it’s the direct cost of extraction. In other cases (offshore coastal drilling, ANWR), it’s the indirect cost of environmental despoilation.

Either way, the price of oil will inevitably rise to the point where these sources become economically viable to extract, whatever their costs (direct and indirect). If we’re not there now, perhaps we’ll be there a decade from now, or two decades …

Anyway, rather than outright banning offshore coastal drilling, I would require companies (as a condition of obtaining a drilling license) to pay into a multi-billion dollar escrow fund, to pay for environmental cleanup in case of a spill.

If they operate without incident, they will eventually get their money back. If there is an incident, well, let’s just call it what it is — part of the cost of extracting that oil. If the price of oil is high enough, this will be worth it, to the companies in question. If it’s not high enough now, eventually it will be…

In the meantime, I’m with TMS on the subject of alternative energy, and wish that John McCain had some clue what the phrase ‘cap and trade’ means. It is, after all, the centerpiece of his “energy policy.”
14 Mark Says:
June 18th, 2008 at 10:05 pm
I don’t have any problems with your escrow idea - sounds perfectly reasonable….I’ll have to explore McCain and energy further another time soon, because I do want to get to his call for 45 new nuclear reactors by 2030…
15 Jacques Distler Says:
June 19th, 2008 at 12:57 am
Well, as you know, I am a strong believer that we need to invest in nuclear power. The maddening thing about that NYT article is that it gives not the slightest hint as to how McCain intends to achieve his stated goal.

I have no idea whether that’s the result of reportorial laziness (”Policy details? Who the #@%* cares about policy details!”) or the result of McCain having pulled a number out of thin air without, himself, having any idea how to achieve it.
16 peter Says:
June 19th, 2008 at 10:41 am
The Times editorial page makes a persuasive case today why offshore drilling will have a minimal and delayed effect on oil prices:

http://www.nytimes.com/2008/06/19/opinion/19thu1.html?_r=1&ref=opinion&oref=slogin

Bush’s speech on the subject — he announced an abrupt change in federal policy which has been in effect for eighteen years, and said that if the Democrats don’t legislate it by July 4th, then it’s all their fault — was risible, but I, like most people, tend to tune him out these days.
17 Clint Says:
June 19th, 2008 at 2:05 pm
Jacques-

First, the common ground: I totally agree on nuclear. Can’t say enough about it.

Re: Escrow funds against possible environmental damage — sounds fine to me. Those costs should be passed along to the companies one way or another, to give them the right incentives. The devil, of course, is in the details. Exactly how much should a company be penalized for the death of a single seagull?

It’s (relatively) easy to (at least crudely) estimate the cost of the work and energy and infrastructure to extract oil from tar sands and then compare that to the current market price of oil. Much harder to agree on how much oil you’d need to extract from ANWR to balance the damage from an oil spill that kills, say, 12,000 rare seagulls and 100 caribou. Of course, that’s where the real disagreement on ANWR arises…

Re: “the ridiculous argument that exploiting these previously untapped deposits of oil would bring down the price.” — Just plain crazy.

Look. I’m not saying that drilling in ANWR would cut the price of gas at the pump by half. Nothing like. But it would probably make a difference of 10 or 20 cents per gallon. Add in offshore drilling and other domestic resources, and it would be more. That’s not nothing. And it’s before you include all the domestic jobs, and the effect on the balance of trade.
18 Clint Says:
June 19th, 2008 at 2:08 pm
Peter-

That editorial is just a restatement of the point that a change in drilling policy now affects oil prices ten or twenty years down the road, not next week.

When we’re arguing about a policy that was established 27 years ago, do I really need to point out that we’re feeling the pain of that decision now?
19 peter Says:
June 19th, 2008 at 2:33 pm
The editorial also points out that allowing offshore drilling is a great way to reward the administration’s friends in the oil industry by allowing them to lock up large parcels of land (or whatever you call it when it’s offshore) before thet leave town.

If the Bush administration were serious about reducing the cost of oil, they would sell some of the oil in the Strategic Petroleum Reserve (or, at minimum, declare a moratorium on buying more oil). This could be the thing which pricks the speculative bubble. Moreover, it would be a nice reward for the treasury, which is selling oil at a far higher price than it paid for it.

My guess is that the GOP recognized white blue collar males as the swing voters in 2008, and figured that a lot of them are pissed off about $4 gas and don’t care so much about the coastal enviroment, especially if they live in swing states like Michigan, Wisconsin, and Ohio. They get to paint the Democrats as tree huggers who are the ones keeping oil prices high (forget about the consequences of Iraq, growth in emerging markets, depleting reserves, the falling dollar, and the other causes of high oil prices). As Ronald Reagan said: facts are stubborn things. However, who needs facts when you have a narrative?
20 too many steves Says:
June 20th, 2008 at 9:24 am
Such a cynic you are. Motivation is not an argument for or against expansion of drilling rights and exploration. Feels good to say it though, I guess.
21 Jacques Distler Says:
June 20th, 2008 at 10:43 am
Clint,

I’m not blaming you, but there are those who are aggressively hawking ANWR and offshore drilling as the solution to high gas prices (see, for instance, the examples cited by Chris above). These people are a problem. They are lying to the American people and, by relentlessly muddying the water, they are making it much more difficult to have a real public debate about energy policy in general and about ANWR and coastal drilling in particular.

The net effect on prices at the pump, of opening up these reserves, will be modest at best. For the sake of argument, I’ll grant you your 10¢ a gallon, even though I think that’s an overestimate. The reason I’m willing to let this slide is that I think it’s entirely the wrong question to be asking. The right question to ask is: has the price of oil risen to the point where these deposits are viable to exploit?

If you look at just the direct costs of extraction (and ignore the indirect, environmental costs) — which is what the oil industry and their friends in the Bush Administration do — then, in the case of ANWR, the answer has probably been “yes” for many years. In the case of offshore coastal drilling, answer used to be “no”, but the recent run-up in the price of oil seems to have turned it into a “yes”.

If you added in the indirect costs (say, via the “environmental escrow fund” I suggested above), then it seems to me that the answer, in the case of ANWR, changes to a “maybe” and in the case of coastal drilling probably changes back to a “no.”

At least, that’s at today’s prices. If the price of oil continues to rise that will change. Eventually these deposits will be exploited. But the decision of when to do so is better made on the basis of a rational calculation of costs, rather than some fantasy about slashing the price of gasoline.

Re: Escrow funds against possible environmental damage — sounds fine to me. Those costs should be passed along to the companies one way or another, to give them the right incentives. The devil, of course, is in the details. Exactly how much should a company be penalized for the death of a single seagull?

There are many thorny issues to be resolved.

To pick one: should this escrow fund operate on a “no-fault basis” (everything paid out of a common pool) or should it assign costs to the compan(ies) responsible for each environmental incident?

The latter provides the strongest incentive for each company to act as prudently as possible. But it’s also much more complicated and could lead to mountains of litigation in cases where it’s not 100% clear how to apportion responsibility.

Also, as you point out, it’s easy to attach a pricetag to some things (the cost of mopping up an oil spill), much harder to attach a pricetag to other things (dead seabirds, say). And, in the case of ANWR, it is claimed that even normal operations will have a disruptive environmental effect.

Anyway, it’s much better to be having this debate, rather than the one about how Democrats are responsible for high gas prices, because they refused to allow drilling in ANWR.
22 peter Says:
June 20th, 2008 at 11:22 am
Steve: you are absolutely correct — motivation is irrelevant to the merits for or against expanding drilling rights. It is always possible that political self-interest coincides with the public good. However, when there is the strong likelihood that the motivation is political, then it creates doubt about the wisdom of the agenda, and hence ought to be subject to even greater scrutiny.
23 too many steves Says:
June 20th, 2008 at 11:58 am
So very right you are, and I count myself as cynical as the next person, but I think we can evaluate Bush’s argument without having to assess it’s wisdom or credibility based on our understanding of his motivation. For example, see the argument of one Distler, Jacques, above in post #22. None of the suggested actions, including nuclear power, are going to have an immediate impact on prices at the pump. I think we can all agree on that?
24 peter Says:
June 20th, 2008 at 1:07 pm
I can certainly agree to that. The only thing I can think of which would have an immediate effect on the price of gas would be to release oil from the Strategic Petroleum Reserve.

However, I’m not so sure that lowering the price of gas would be a good thing. I see too many soccer moms leave the engine running on their Ford Explorers while they are parked so they can listen to the radio. Changing that mindset would be helpful.
25 Jacques Distler Says:
June 20th, 2008 at 2:39 pm
Changing that mindset? Maybe the Israelis could help you out.
26 Jacques Distler Says:
June 20th, 2008 at 2:40 pm
Damn! Another comment swallowed by Mark’s spam filter.
27 Mark Says:
June 20th, 2008 at 5:44 pm
I’ll look for it and restore it…sorry…
28 Mark Says:
June 20th, 2008 at 5:46 pm
It’s back - #25 above, if anyone is keeping score…
29 sam Says:
June 21st, 2008 at 2:59 pm
Ken Williamson makes so good points about this on http://www.posterspost.com.

He makes a good case for drilling.

The point is, we have no choice but to drill if we continue driving our vehicles.
30 Peter Says:
June 22nd, 2008 at 8:22 am
A letter writer to the New York Times makes an interesting point. He suggests that the President declare the offshore fields a strategic asset and continue the moratorium, because we will need it in the future a lot more than we need it today (or ten years from today).
31 Peter Says:
June 22nd, 2008 at 8:47 am
I always thought conservatives were enthralled with the magic of the market. Now that everyone is upset about $4 gas, there is now enthusiasm for distorting the market by reversing long standing policy to deplete our remaining reserves. I guess the market isn’t so magical when it costs you votes.
32 Mark Says:
June 22nd, 2008 at 12:20 pm
How is drilling in our offshore and ANWR assets going against the free market?…I don’t follow you…
33 Peter Says:
June 22nd, 2008 at 1:33 pm
In a free market, the price of oil is determined when buyers and sellers reach an equilibrium — by reversing long-standing policy to increase the supply of oil, the government distorts the market by trying to force an artificially low price. A free market economist would advocate letting the price of commodities be determined by the point where bid price meets asked price without government interference.

This does not necessarily mean that drilling is a bad thing — only that it goes against free market economic theory. If you want to shift the balance of priorities between a moratorium (environmental concerns, keeing the reserves for the future) and drilling (lower oil prices, more domestic control), that’s fine, but it’s a departure from laissez faire economics.
34 Peter Says:
June 22nd, 2008 at 4:34 pm
Looked at another way: we’ve had commodities markets for about three centuries, since Jethro Tull invented the seed drill and modern plough, which enabled farmers to increase their yield. In all that time, governments have pretty much stayed away from the business of trying to set the price of commodities. I’m not sure it’s the right time to start now.
35 Mark Says:
June 22nd, 2008 at 11:58 pm
No, no, no…the government is not ‘artificially’ lowering the price - we’re talking about removing a ban that artificially raises it!…a free market economist would have opposed the ban from the beginning…
36 too many steves Says:
June 23rd, 2008 at 6:12 am
Rather Orwellian I would say: perpetuating a government’s interference in the market is now a capitalist free-market principle? Why do you insist on rewarding the oil barons by restricting the supply of oil?
37 Peter Says:
June 23rd, 2008 at 8:03 am
The ban on offshore drilling was not established to interfere with the market or artificially raise the price of oil. It was enacted from the belief that protecting the environment (as well as beachfront property and the tourism isndustry) outweighed the benefit of more domestically produced oil.

The government is now proposing to alter the status quo for no other reason than to lower the cost of oil. I don’t see how you can view this as free market economics. It is the intentional manipulation of commodity prices to ameliorate public unhappiness with paying $4 a gallon for gas (almost $5 here in California).
38 too many steves Says:
June 23rd, 2008 at 11:35 am
The ban interferes with the market for oil by limiting, even in a small way, the supply. Whether that was intended or not is irrelevant. Much of the oil available in these restricted areas is costly to acquire. The recent spike in oil prices makes this harder to get oil more cost-effective, relatively speaking, that it was previously. Free market economics occurs when supply and demand are allowed to reach equilibrium through, typically, pricing mechanisms. If the government restricts one or the other, no matter how noble the intentions, the market isn’t “free”. That’s all I’m saying.
39 peter Says:
June 23rd, 2008 at 4:15 pm
The logical extension of your argument is that if drillers want to look for oil under the Washington Monument and the government doesn’t allow them to, then it is therefore restricting the market. That’s all I’m saying.

I don’t think it is necessarily wrong for the government to interfere in the markets. I tend to agree with Thomas Friedman, who wrote in last Saturday’s Times that the government ought to set a floor of $4.50 per gallon as a means to reduce our use of oil. It can be made revenue neutral through tax credits or rebates. While I think that the government should set a very high bar before getting involved in trying to force commodity prices one way or the other, in my view the economic, environmental, and geo-political benefits of a reduction in the use of foreign oil meets this bar handily.
40 Mark Says:
June 23rd, 2008 at 5:09 pm
Look, any way you slice it, the free market position would be one free of government interference. To say the government would be interfering in the market by removing a government-imposed ban that artificially lowers the supply of oil is the textbook example of an Orwellian argument, as too many steves pointed out…

If I ban the import of Chinese medicine because I think it is unsafe, then remove that ban, you would accuse me of betraying free market principles? Because there is no difference between the two situations, in terms of supply and demand…
41 Mark Says:
June 23rd, 2008 at 5:11 pm
And yes, if the government said you can’t drill under the Washington monument, it would be restricting the market - by definition. Now of course, we would all agree with restriction in that case…and no one is arguing for complete laissez faire, here…but you are the one accusing conservatives of betraying the free market, so you brought it into the debate, and your reasoning is frankly bizarre…
42 peter Says:
June 23rd, 2008 at 5:37 pm
I think we are going in circles here. It seems to me that if the government takes an action for the sole purpose of lowering the price of a commodity, by definition it is not letting the free market do its thing. Whether it is limiting or expanding drilling rights to influence the price of oil, imposing tariffs to keep out foreign goods, or raising corn prices by subsidizing ethanol, the government is taking an active role in manipulating the markets, rather than the passive role of free market economics.

Nor is it Orwellian: when the ban was put into place, it may have had the incidental effect of raising the cost of oil (or not: there was a lot more oil then, and it was a lot cheaper), but it was put into place for reasons entirely unrelated to the price of the commodity. The proposed action now is done for no other reason except to lower the commodity price. I’ve never taken an Economics course – and I don’t claim any expertise in free market economics (although my college roommate married Arthur Laffer’s daughter, of the eponymous Laffer Curve) – but I don’t see how an act designed to manipulate the price of commodities is consonant with free market economics.
43 Jacques Distler Says:
June 23rd, 2008 at 6:04 pm
Excuse me for butting in, but I can’t resist asking, “Who has property rights to drill for oil in ANWR, or off the coast of California?”

By “interfering with the free market,” I assume you mean that the big, bad Government is preventing those, with said property rights, from exercising their rights and drilling for oil.

On the other hand, if the owner (as it happens, the Federal Government) decides not to sell drilling rights to a 3rd party, I don’t see how that can be construed as “interfering with the free market.”

It may be good public policy, it may be bad public policy, but “interfering with the free market?” Hardly.
44 Mark Says:
June 23rd, 2008 at 9:12 pm
Jacques, you raise an interesting point re: property rights, but that’s not quite what I mean. My whole point, and one which it appears Peter and I are going to have to agree to disagree on, is that it’s incredible to me to suggest that conservatives are ‘abandoning the free market’, as our friend Peter suggested, by coming out in favor of offshore drilling, when a more convincing case could be made that the ban on offshore drilling was ‘abandoning the free market’ (i.e., placing certain reserves outside of the normal forces of supply and demand by declaring by government fiat that the supply in these locations would, by necessity, be zero)…

However, in response to your post specifically, yes, if the government owns the drilling rights, it is free to dispose of them as it chooses…it was not my choice to frame this issue in terms of the ‘free market’, I was merely responding to someone else’s decision to do so…as you say, the more proper way of framing the issue is, to me, whether continuing the ban is good or bad policy…
45 JStandish Says:
June 29th, 2008 at 11:38 am
The argument for resuming offshore drilling in the United States is totally misleading. Roughly three-quarters of the 90 million-plus acres of federal land being leased by the oil companies onshore and off are not being used to produce energy. That is 68 million acres altogether, among them potentially highly production leases in the Gulf of Mexico and Alaska. These leases should be exploited before the oil companies are allowed to get any more. Both McCain and the administration have not been honest with the American people. There are suspicions that the oil industry’s main objective is to stockpile millions of additional acres of public land before the Bush administration leaves town.