I was reading commentary on First, let's talk policy. As we've discussed many times before, and as the experts have said, "Expanded offshore drilling in the U.S. won't affect oil and natural-gas prices much." Heck, even the American Petroleum Institute says that "it could take anywhere from five to 10 years for production to begin" offshore, once moratoria are lifted. In other words, there will be no direct impact on oil prices from offshore drilling for 5-10 years. So much for that idea.
Beyond that, the bottom line is that the United States can not drill its way out of its energy and environmental challenges. As a mature oil province with just 2% of the world's oil reserves (far less of that is off the coasts) and nearly one-fourth the world's oil consumption, the obvious answer is on the demand - not the supply - side of the equation. That means energy efficiency, primarily, plus alternative fuels combined with new technologies that can replace oil in transportation - where it is consumed for the most part.
The last issue - but not least - is the environment. The science says that, if we want to stave off the worst impacts of global climate change, we need to slash our greenhouse gas emissions 80% by 2050 (at the latest). How does increased oil production contribute to this goal? Answer: it doesn't. There are also the potential environmental impacts more locally of offshore drilling, particularly the danger of oil spills. From a policy perspective, these dangers might be worth dealing with if not for all the issues raised above. Given all those issues, however, why take the risk? It makes very little, if any, sense.
Now, on to the politics.
Right now, Americans are feeling a great deal of pain from high energy - particularly gasoline - prices. And as people are wont to do, they want relief N-O-W, even if there's no practical way to do it. They also want that relief with no major changes to their lifestyles, e.g. consuming a lot less energy. In other words, they want to have their cake and eat it too. What else is new?
Finally, the American people generally don't know the numbers or understand why oil prices have risen. According to PollingReport.com, they blame pretty much everything - OPEC, the Bush Administration, the war in Iraq, the environmentalists, you name it - everything except for supply and demand forces, which are actually the correct answer. And politicians probably don't understand - or WANT to understand - the situation any better.
Given all this, it's not surprising that Americans favor offshore oil drilling, which won't have any impact on oil prices for 5-10 years minimum, while showing less enthusiasm for energy conservation and efficiency, which could start having dramatic impacts on prices almost immediately. I mean, just look at the $20 per barrel declines in the past couple of weeks based on a slight decline in world oil consumption growth. Imagine if we started slashing our oil consumption in a serious way? The price would plummet almost immediately.
Still, given the politics we face right now, in the midst of stupid season a presidential and congressional election cycle, what are the smartest politics on this for the candidates? One option is to pander like mad - crack down on "speculators!"; drill off the coasts!; have a gas tax holiday!; sue OPEC!; release oil from the Strategic Petroleum Reserve!
Another option is what Barack Obama appears to be talking about, push for a comprehensive energy policy that includes "compromise in terms of a careful, well thought-out drilling strategy that was carefully circumscribed to avoid significant environmental damage." A comprehensive plan, such as the one proposed by the Senate "Gang of 10" (and apparently, tentatively endorsed by Barack Obama) would "open new areas in the Eastern Gulf of Mexico and Southeast Atlantic to oil and gas drilling, while raising taxes on the major oil companies." It would also involve an "$84 billion New Energy Reform Act would fund an effort - which its backers liken to the Apollo moon landing program - to transform the nation's cars and trucks, with a goal of having 85 percent of new vehicles on the road run on nonpetroleum-based fuels within 20 years." Depending on exactly what those "nonpetroleum-based fuels" might be, this could be both good politics AND good policy. However, none of this will cause gasoline prices to fall immediately. Still, an "Apollo"-style project could get people excited, could jump start our country in the right direction, and could get people out of the sterile political argument they're stuck in now.
Would a limited compromise on offshore drilling - which won't accomplish much of anything, but is politically popular - be worth it in a tradeoff with some serious, sound policy making that really COULD make a difference? I'd need to see the details, including stringent environmental protections in any new oil drilling areas, but overall I'm open to a "grand bargain" that would really break our oil addiction, not to mention the power of OPEC. My guess is that a lot of Americans would be as well.
Specifically, would this be good for Barack Obama? It's possible, but I really wonder about the "framing" of the issue, whether or not this is playing right into the "drilldrilldrilleverywhere" Republican crowd's hands? Or, could this be a brilliant piece of political "triangulation" a la Bill Clinton at his triangulating best, helping to "reframe" the issue and turn it from a political disadvantage for Democrats like Barack Obama into a neutral or even an advantage? I think it's possible, depending on how it's handled exactly, although I remain skeptical. What do you think?
The political problem is that this will be listed as a flip-flop by the Republicans, and met with a McCain retort that Obama is finally coming to his senses on the need to drill
I don't see how he can escape this criticism -- the same way that McCain can't escape criticism on the timetable for Iraq issue
A better tactic would have been to stick to his guns, but say "if Congress passed such a bill permitting it I would not veto it if it was included in a comprehensive package"
A small step this year would be something. It might create the foundation for what will be a much broader energy bill next year.
Another thing I don't understand is that Barack has so many situations where he's damned one way or the other. He's not dark enough, He's too dark--he doesn't help minorities enough, he helps them too much. He's against drilling, he's flip flopping for off shore drilling. And there's more. I believe it has something to do with GOP theory of Black and white, your either with us or against us. They don't know how to compromise, somehow compromise is seen as weakness.
There's no way in hell this election should be close, Barack better get on the offense and start kicking some McSame ass. I've heard the pundents say that the only way McSame can win is by going negative, I agree. So let's get ready for some ugly crap coming down the highway. Let's define McSame, Let's not have them define Barack. This election is not a slam dunk. Over confidence kills. Rock on.
New Energy Reform Act of 2008
Roadmap to a Secure Energy FutureOverview
Knowing that the rising cost of energy is the number one issue facing Americans today, ten Senators from both sides of the aisle have come together to present a proposal to reduce gas prices, lessen our dependence on foreign oil, and strengthen our economy. The New Era legislation represents a true compromise, incorporating common sense ideas.The purpose of the legislation is to transition our economy - particularly the surface transportation sector - to run off alternative fuels other than gasoline and diesel. The legislation dedicates at least $20 billion in the next ten years to this important endeavor.
To ease gas prices in the interim, the New Era bill includes significant conservation provisions and targeted, responsible measures to increase our domestic production of traditional fuel sources. Any new domestically produced resources must stay in the United States. The bill will also establish a National Commission on Comprehensive Energy Policy to identify critical "inhibitors and prohibiters" to the goals established in the bill and to make recommendations to Congress on policies to overcome these obstacles as well as to address related matters such as carbon capture and storage, nuclear and renewable energy, and the need for upgrading and transitioning the national grid and other energy infrastructure.
The New Era bill contains three main components:
• An intensive effort to transition vehicles to non-petroleum based fuels;
• a robust federal commitment to conservation and energy efficiency; and
• targeted, responsible domestic production of energy resources.Converting Cars and Trucks to Non-Oil Fuel Sources to Regain Energy Independence
The New Era legislation funds a $20 billion "Apollo Project" like effort to support the goal of transitioning 85% of America's new motor vehicles to non- petroleum-based fuels within 20 years. To accelerate this transition, the legislation includes:
• $7.5 billion for R&D focused on the major technological barriers to alternative fuel vehicles, such as advanced batteries;
• $7.5 billion to help U.S. automakers and parts makers re-tool and re-equip to become the world leader in making alternative fuel vehicles;
• Consumer tax credits of up to $7,500 per vehicle to incentivize Americans to purchase advanced alternative fuel vehicles (those that run primarily on non-petroleum fuels) and up to $2,500 to retrofit existing vehicles with advanced alternative fuel engines.Enhancing Conservation
To ease gas prices and protect our environment during the transition, the proposal includes a significant federal commitment to promoting conservation and efficiency. These include:
• Extending renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the production tax credit, through 2012 to create greater certainty and spur greater investment;
--MORE--
New Energy Reform Act of 2008, Page 2• New consumer tax credits of up to $2,500 to purchase highly fuel efficient vehicles, to help Americans reduce their annual gas costs and reduce oil imports;
• Extending and expanding the $2,500 tax credit for hybrid electric vehicles;
• $500 million for R&D into new materials and other innovations to improve vehicle fuel efficiency;
• $2.5 billion in R,D&D on next generation biofuels and infrastructure;
• Tax incentives for the installation of alternative fueling stations, pipelines and other infrastructure;
• Expanding transmission capacity for power from renewable sources;
• New dedicated funding for the weatherization assistance program.Responsible, Targeted Domestic Energy Production
To help meet our energy needs until our economy transitions to advanced alternative fuel vehicles, the New Era bill increases domestic energy production in environmentally responsible ways. The legislation:
• Provides a CO2 sequestration credit for use in enhanced oil recovery to increase production from existing oil wells while reducing greenhouse gas emissions;
• Opens additional acreage in the Gulf of Mexico for leasing (in consultation with the Defense Department to ensure that drilling is done in a manner consistent with national security) and allows Virginia, North and South Carolina and Georgia to opt in to leasing off their shores. Retains an environmental buffer zone extending 50 miles offshore where new oil production will not be allowed. Requires all new production to be used domestically. Creates a commission to make recommendations to Congress on future areas that should be considered for leasing. Provides for appropriate revenue sharing for states that allow leasing off their shores;
• Provides grants and loan guarantees for the development of coal-to-liquid fuel plants with carbon capture capability. Plants must have lifecycle greenhouse gas emissions below those of the petroleum fuels they are replacing;
• Supports nuclear energy by increasing staff at the NRC, providing workforce training, accelerating depreciation for nuclear plants, and supporting R&D on spent fuel recycling to reduce nuclear waste.Speculation
The Group decided to focus on increasing supply and reducing demand and will await the mid-September report of the CFTC to consider this subject.Offsets
The $84 billion in investments in conservation and efficiency in the New Era bill will be fully offset with loophole closers and other revenues. Approximately $30 billion will come from new revenues from the oil and gas industry through such measures as modifying the Section 199 manufacturing deduction for oil and natural gas production and other appropriate measures to ensure that the federal government receives its fair share of revenue from Gulf of Mexico leases. Remaining offsets will be finalized in consultation with the Finance Committee after accounting for interaction effects with other pending legislation.
Again, let me just emphasize that offshore drilling is a red herring, basically a complete waste of time in terms of having a measurable impact on the world oil supply/demand picture, but I wonder if it's time to give a bit in this area in exchange for a major package of incentives for energy efficiency, conservation, alternative fuels (NOT corn ethanol), etc.
As for the Gang of 10 proposal, it strikes me that passing any kind of a comprehensive energy program in the U.S. would have an immediate effect---- psychologically, i.e.,
mentally (excuse me, Dr. Phil). That is, it would have an impact on the price of oil since the market looks to the future and supposedly, mysteriously, takes into consideration future demand and expected future events, notwithstanding growing demand in Chindia.
As to Bakken, it's an interesting formation (see here for more). It's but actually NOT "enormous," but pretty big at 3.0-4.3 billion barrels "technically recoverable" (for comparison purposes, Saudi Arabia's Ghawar field has already produced about 60 billion barrels). However, it does seems to be fairly complex formation requiring horizontal drilling. Still, it seems at least as promising if not more so than drilling off the east coast of the United States.
On your last point, I think that if oil markets saw the United States get really serious about slashing its oil imports, the psychology of long-term futures prices could be impacted. It's hard if not impossible to quantify, but let's start slashing our oil consumption and see what happens!
It is not remotely a flip flop. I don't see that his position has changed.
If we increase our Dem majority enough, we can pass energy legislation without expanded oil drilling. Thus, we can move forward sensibly to address global warming, energy supply issues and jobs all at the same time!
Our Party's basic position has a lot more in common with T. Boone Pickens than the Republican approach.