July 14, 2008

Bush-McCain Republican Energy Plan Will Not Bring Down Gas Prices

The Bush-McCain Republican approach to lowering gas prices amounts to nothing more than drill, drill, drill. Democrats support expanding domestic production but know that drilling alone will not solve this crisis. Big Oil has failed to drill on more than 68 million acres of leased land. President Bush says that more drilling will quickly and significantly bring down the cost of gas at the pump, but his own Energy Information Administration and even some Republican Senators disagree. Instead of just calling for more drilling, Democrats are committed to providing short- and long-term solutions to this crisis, like opening up the Strategic Petroleum Reserve, curbing the market speculation that experts believe has driven up the price of oil and investing in renewable energy. Bush-McCainRepublicans should stop trying to score political points and instead work with Democrats on solutions to bring down the price of gasoline.  

Oil companies are not drilling in areas currently under lease:

There Are 68 Million Acres of Leased Federal Lands That Are NOT Producing Oil.

• 33.5 Million Outer Continental Shelf Acres Under Lease Are NOT Being Drilled. There are 33.5 million acres of the federal OCS lands that are under lease but are not producing. In contrast, just 10.3 million acres of offshore leases are producing. [MMS, 2007]
• 34.2 Million Onshore Acres Under Lease Are NOT Being Drilled. There are 34.2 million acres of the federal onshore lands that are under lease but are not producing. In contrast, just 13.3 million acres of onshore leased lands are producing. [MMS, 2007]
• 68 Million Acres Is Slightly Larger Than Colorado – Bigger Than Every State Except The 7 Largest. 68 million acres is equivalent to 106,000 square miles, just larger than Colorado at 104,000 square miles. The only states larger are Alaska, Texas, California, Montana, New Mexico, Arizona and Nevada. [Enchanted Learning]

Just 21 Percent of Outer Continental Shelf Leases Are in Production. There are 7,740 active leases in the outer continental shelf and only 1,655 are in production. [Department of Interior]

Just 19 Percent of Outer Continental Shelf Acres Under Lease Are Producing. There are over 41,000,000 acres in the outer continental shelf have been leased for oil drilling, yet only 8,123,000 acres are in production. [Department of Interior]

Most recoverable offshore oil and gas is open to drilling:

79 Percent of Recoverable Offshore Oil Is Open to Drilling. Currently 79 percent of America’s technically recoverable offshore oil reserves are open for leasing, while just 21 percent are closed to drilling. [Minerals Management Service, 2006]

82 Percent of Recoverable Offshore Natural Gas Is Open to Drilling. Currently 82 percent of America’s technically recoverable offshore natural gas reserves are open for leasing, while just 18 percent are closed to drilling. [Minerals Management Service, 2006]

Bush administration's energy experts project expansion of drilling would not significantly lower gas prices:

Head of Bush Administration’s Energy Information Administration Said Offshore Drilling Would Have Little Affect on Gas Prices. “In response to record pump prices, Republican presidential candidate Sen. John McCain and President George W. Bush this month called for Congress to end its moratorium on drilling off the East and West coasts and in Florida waters, leaving it up to each affected state to decide where to permit drilling… However, Guy Caruso, who heads the federal Energy Information Administration, said consumers would see little savings at the pump. ‘It would be a relatively small effect, because it would take such a long time to bring those supplies on,’ Caruso said during a briefing at the Center for Strategic and International Studies on the EIA's new long-term international energy forecast. ‘It doesn't affect prices that much.’ Most energy experts say it would take five to 10 years to find oil in the closed areas and bring the crude to market. Caruso said the additional supplies would amount to only a couple of hundred thousand barrels of oil a day. ‘It does take a long time to develop these resources, and therefore the price impact is muted by that,’ he said.” [Reuters, 6/25/08]

Bush Administration’s Own Energy Information Administration Found Outer Continental Shelf Drilling Would Have No Significant Impact on Gas Prices  “The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030… Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.” [Energy Information Administration, 2007]

• On President Bush’s Watch, Offshore Drilling Has Increased, But the Price of Gas Has Skyrocketed. The number of domestic drilling permits issued and wells have increased dramatically from 3,000 permits and wells in 2000 to nearly 8,000 permits and 6,000 wells by 2006. Over the same time period gas prices have skyrocketed from $1.25 per gallon in January 2000 to over $4 per gallon today. [Bureau of Land Management, answers to questions submitted 3/1/07; EIA Historical Data]

Even Republican senators admit drilling would have no immediate impact on gas prices:

Senator McCain Said Expanding Domestic Production Would Take Years to Develop. “But I also have to tell you that with those resources, which would take years to develop, it would only postpone or temporarily relieve our dependency on fossil fuels,” McCain said. [Seattle Post-Intelligencer, Joel Connelly Column, 6/20/08]

Senator McCain Said Exploiting Domestic Oil Reserves Would Take Some Years, Could Have a Beneficial “Psychological” Impact. “Even though it may take some years, the fact that we are exploiting those reserves would have psychological impact that I think is beneficial,” said McCain during a town hall meeting. [Associated Press, 6/24/08]

Senator Martinez Said Drilling Is Only Long Term Solutions, Not Immediate Answers. “I don't think that solar and renewables are any more of an answer tomorrow than opening up more areas of exploration would be. All of these are long-term solutions, but we've got to begin down the path at some point.” [Senators Martinez and Cornyn Press Conference, 7/8/08]

• Senator Martinez Said Most Immediate Thing We Could Do to Reduce Gas Prices Is to Reduce Consumption. “In my way of thinking, the most immediate thing we could do to impact prices is consume less. And so, that is the most immediate thing we can do. And so, that's why we should look -- and I know Senator Warner has been talking about asking the DOD to find ways of using less. Maybe they could reduce consumption. And if we do that across the board, and if we do that across the country, that could begin to have an impact.” [Senators Martinez and Cornyn Press Conference, 7/8/08]

Economists and energy experts believe speculation has played a major role in driving up energy prices:

Economist Mark Zandi Said Speculation Played a Role in Driving Up Oil Prices. Asked if he believed speculation played a role in driving up oil prices, Zandi responded, “Yes, I believe so, yes. The oil market has become a financial market. And it's affected by all kinds of speculators, momentum players, people just betting on prices increasing or falling, in this case, obviously, increasing.  And so they ran in quickly and drove up the price. And that clearly has played a role. I mean, you don't see a $10 move in the price of oil without some financial speculation involved, as well.”  [PBS Online Newshour, 6/6/08] 

Gerry Ramm of the Petroleum Marketers Association of America Blamed Speculation for Driving Up Oil Prices.  “Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices today. Excessive speculation is being driven by what Michael Masters of Masters Capital Management refers to as index speculators, as compared to traditional speculators.” [Testimony of Gerry Ramm, Petroleum Marketers Association of America, before Senate Committee on Commerce, Science and Transportation, 6/3/08]

Former Director of Commodity Futures Trading Commission’s Trade Division Michael Greenberger Said Speculators Drove Up Oil Prices By Trading in Unregulated Markets. “Speculators are able to drive up crude oil prices today because they’re allowed to trade in the U.S. in futures markets not overseen by U.S. regulators. Therefore, they are free to dominate these markets by taking huge positions within them. And there is an additional fear that, because of a lack of oversight, they may be engaging in manipulative practices — i.e., wash sales and false reporting that would be barred in a regulated environment.” [McClatchy, Interview of Michael Greenberger, 6/17/08]

Greenberger Calculated 70% of Oil Market is Driven by Speculation and Not Commerce.  “My calculation is right now that about – at least 70 percent of the U.S. crude oil market is driven by speculators and not people with commercial interests. Most of those speculators do not have spec limits. They can buy whatever they want.” [Testimony of Michael Greenberger, Professor at University of Maryland Law School, before Senate Committee on Commerce, Science and Transportation, 6/3/08; McClatchy, 6/17/08]

Acting Chairman of Commodity Futures Trading Commission Said the Oil Markets Are “Ripe for Those Wanting to Illegally Manipulate the Market.” Walter Lukken, Acting Chairman of the Commodity Futures Trading Commission, conceded that crude oil markets are “ripe for those wanting to illegally manipulate the markets.” [CNBC, 06/17/08]

Even Saudi leaders and oil experts blame speculation for driving up oil prices:

Saudi Arabia’s King and Oil Minister Blame Speculation for Driving Up Oil Prices.  “But the Saudi oil minister also blamed speculators and asserted supply is not the problem.  '’In today's environment, I am convinced that supply and demand balances and crude oil production levels are not the primary drivers of the current market situation,'’ al-Naimi said. Officials and energy executives from more than 35 countries thronged a large hall where he spoke.  King Abdullah also said Saudi Arabia is not the culprit.  The king cited several factors driving '’the unjustified, swift rise in oil prices'’ including '’speculators who play the market out of selfish interests,' plus higher consumption by developing countries and higher taxes in some countries.  U.S. Energy Secretary Samuel Bodman, however, said earlier that U.S. officials had found no evidence speculators are driving up prices.” [NY Times 6/22/08]

Former Saudi Oil Minister Yamani Said Speculation Was the Main Cause of Worldwide Oil Crisis.  “The man who was the Saudi oil minister for 25 years has called for a radical change in the pricing system, conceding the cost of crude could more than double to $US300 a barrel.  Ahmed Zaki Yamani has told SBS TV's Dateline that while supply is a problem, the main issue causing the worldwide oil crisis is speculation.” [The Australian, 6/18/08]

 

 

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