I like your entire post fox, to me it all makes sense more oil , more jobs . I do want to say again I do think we need to exploit all our option also, hydro , wind , solar and any new technology, It is going to take everyone one in America to help us become non dependent on ME oil, I even heard that hemp could be raised and help produce and hemp oil that can be used, The oil producing "bug" is another thing I have heard , along with conservation and innovation we can be self sustaining and continue to be the GREATEST COUNTRY EVER!!!

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Aint but three things in this world thats worth a solitary dime,
But old dogs and children and watermelon wine.
Tom T. Hall
http://www.obamatruth.org/

One commonly heard remark about domestic drilling is that it would have little effect on world supply and therefore have little affect on the price of gasoline for American consumers.

However increasing the domestic supply of oil affects the price in more ways than the simple supply and demand graphs that you are most likely familiar with. These effects reach much farther in the economy than the price consumers see at the pump.

First, domestic production increases the profits gained by domestic companies, and in turn creates jobs not only for their employees, but also all the people whose industries are even related to products used by the companies who are drilling (for example, steel production and drilling equipment). Oil companies also invest in alternative forms of energy, even if the proportion of what they invest is low compared to what they invest in furthering their oil production. This brings wealth to the US instead of to the Saudis and the rest of the Middle East.


Second, domestic drilling would have a positive effect on the US trade deficit. Oil makes up a large part of the US trade deficit, and that trade deficit is in turn the direct factor affecting the value of the dollar. In other words, the more domestic oil we produce, the more valuable the dollar will become, even if that still means that the value of the dollar is falling, it wouldn't be falling as fast as it would without domestic production. Domestic oil would also be unaffected by the cost of shipping foreign oil to the US, as it would be closer to American consumers.

Here are some statistics:

The midpoint of estimated recoverable reserves of oil in the US stands at about 800 billion barrels of oil. http://rand.org/pubs/monographs/2005/RAND_MG414.pdf

In comparison, the total proven reserves of the entire Middle East is only 685 billion barrels and its total estimated reserves stand at 899 billion barrels. http://www.runet.edu/~wkovarik/oil/oilcharts.html

The US trade deficit in 2005 was $60.9 billion per month. Oil was $34.5 billion of that, more than half, 56.65%. http://www.presstv.ir/detail.aspx?id...tionid=3510213

The number of barrels imported per year is about 4 billion barrels (3.66 in 2007) http://www.dailykos.com/story/2008/6...628/766/538262

Here's an all-round article: http://www.frbsf.org/publications/ec...el2006-24.html


Third, increasing domestic production would decrease the power of OPEC and its level of control on price that it has due to its control over a large portion of the world's oil supply. It is, in a way, an international monopoly, controlling 41% of world supply (2004).

http://www.eia.doe.gov/oiaf/ieo/oil.html

By producing our own oil, we would strike at this monopoly and force them to reduce their prices due to increased competition.

Fourth, drilling for domestic oil would strike at the heart of the speculators currently driving up the price of oil. Speculators rely on the fact that the price of oil continues to go up. They then buy into the market to make a profit but further drive up the price of oil. When many speculators enter the market, the price can be driven up much farther than the market value. By drilling for domestic oil, and even by saying that we will drill for domestic oil, we can puncture the speculatory bubble, driving the price back down to the market value. The new production could also be coupled with a large release of oil from the Strategic Petroleum Reserve to further hurt the speculators. All would drastically reduce the price of oil.


Questions:

"Why not use government subsidies for renewable energy to lower the demand for oil instead. Wouldn't that be money better spent?"

Well, it's not money better spent if your primary concern is the cost of energy. Subsidizing the renewables market would cost more money to reduce demand than it would cost to simply buy the more expensive oil. It's a simple economic statement to say that the only industries that are given subsidies are those that are not as economically efficient as the existing ones. That always holds true so long as the market is free or mostly free (as we have in the US). Even if you are to look to the future and talk about investing in future renewables, the private sector would still invest by itself and not need subsidies to invest in renewables if they were economically viable. The bottom line is, in the purely economic sense, subsidies are never money well spent.

"Wouldn't the price of domestic oil still be set by the international market if the government didn't control the price?"
This is true, so long as the government allows oil companies to sell their products freely, as it should. However, this ignores the fact that domestic oil would be slightly cheaper than imported oil through the cost of physically importing the oil. It also ignores the fact that the American oil companies would be able to make money by exporting, further helping our economy and helping consumers to buy oil, whether expensive in pure dollar amounts or not. Oil companies would also benefit from selling this way, giving them the incentive to be in the business and encouraging competition.

"Why won't oil companies simply get the leases to the land and hold them to keep down supply so that they can reap the most profit?"
The answer to this is simple. In a free market, suppliers of goods cannot purposely hold down production to artificially raise prices in order to make profit. If they tried, then a competitor would take advantage of the artificial price and introduce their own supply, making a large profit at the expense of the company or companies that tried to monopolize the market. However, one might point out the cost of starting an oil company and say that the start-up cost is too large to allow competitors to enter the market. The answer to that is easy: record profits in the industry are there for the taking, and would cover the cost of getting in the market. Another person might ask why we don't see more new oil companies. Unfortunately, government regulation in the business, and even the threats of nationalization heard from some on the left make it somewhat more undesirable to get into the business. The government would need to stop this if it wanted the greatest benefit economically.

But there's still one big question remaining....

WHY WOULD THE GOVERNMENT PREVENT DRILLING IN THE FIRST PLACE?

To that, I have no answer....

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

Finally, a real response:

13 cents per galleon isn't nothing, particularly if you don't have to do anything to get it. If the government was to lease more land to oil companies, then the government would make money from the leases while letting the oil companies work to increase the supply of oil produced in the US. If it happened that OPEC would decrease its supply to keep global amounts the same, then OPEC would lose money by selling less oil at the same profit margin. American companies would get that instead.

These are American companies with international sales. The fact of the matter is that oil would be produced in the US, and whether or not it was sold in the US or exported, it would have a positive effect on the trade deficit, a positive effect on world supply, and a positive effect on all of the people they employ in the US and those who receive investments from them in the US. What they do in other countries doesn't somehow cancel out what they do here.

Exxon-Mobil: Exxon Mobil Corporation or ExxonMobil (NYSE: XOM), is an American oil and gas corporation and a direct descendant of John D. Rockefeller's Standard Oil company.[3] Formed on November 30, 1999, by the merger of Exxon and Mobil, ExxonMobil is the world's largest company by revenue, at $404.5 billion for the fiscal year of 2007. It is also the largest publicly held corporation by market capitalization, at $501.17 billion on April 18, 2008.[4] Exxon's reserves were 72 billion oil-equivalent barrels at the end of 2007 and, at current rates of production, are expected to last over 14 years.[5] While it is the largest of the six oil supermajors[6] with daily production of 4.18 million BOE (barrels of oil equivalent) in 2007[7], ExxonMobil's daily production is still surpassed by several of the largest state-owned petroleum companies[8] and it is only 14th in the world when ranked by held oil and gas reserves. [9] Currently, the company ranks #1 in the world in net income, which was almost $40 billion last year.

The Exxon Mobil Corporation global headquarters are located in Irving, Texas. ExxonMobil markets products around the world under the brands of Exxon, Mobil, and Esso. It also owns hundreds of smaller subsidiaries such as Imperial Oil Limited (69.6% ownership) in Canada, and SeaRiver Maritime, a petroleum shipping company.

The upstream division dominates the company's cashflow, accounting for approximately 70% of revenue. The company employs over 82,000 people worldwide, as indicated in ExxonMobil's 2006 Corporate Citizen Report, with approximately 4,000 employees in its Fairfax downstream headquarters and 27,000 people in its Houston upstream headquarters. [2] http://en.wikipedia.org/wiki/Exxon-Mobil

Chevron: Chevron Corporation (NYSE: CVX) is the world's fifth largest global energy company. Headquartered in San Ramon, California, USA and active in more than 180 countries, it is engaged in every aspect of the oil and gas industry, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. Chevron is one of the world's six "supermajor" oil companies.

Chevron employs approximately 59,000 people worldwide (of which 27,000 are U.S.-based) and had approximately 12 billion barrels (1.9 km³) of oil-equivalent net proved reserves at December 31, 2003. Daily production in 2003 was 2.5 million net oil-equivalent barrels (400,000 m³) per day. In addition, the company had a global refining capacity at year-end 2003 of 2.2 million barrels (350,000 m³) of crude oil per day. The company has a worldwide marketing network in 84 countries with approximately 24,000 retail sites, including those of affiliate companies. The company also has interests in 13 power generating assets in the United States, Asia, and Europe. Chevron also has gas stations in Western Canada.

The company marked its 125th anniversary in 2004, tracing its roots to an oil discovery at Pico Canyon, north of Los Angeles. This find led to the formation, in 1879, of the Pacific Coast Oil Company, the predecessor of Chevron Corporation. Another side of the genealogical chart points to the 1901 founding of The Texas Fuel Company, a modest enterprise that started out in three rooms of a corrugated iron building in Beaumont, Texas. This company would later become known as Texaco.

Chevron was headquartered in San Francisco for nearly a century before it relocated its headquarters across the bay to San Ramon CA. Chevron's headquarters buildings at 555 and 575 Market Street, built in the mid-1960s, in San Francisco were sold in December 1999. [1] Its original headquarters were at 200 Bush St., built in 1912. [2] Now, their headquarters are at 6001 Bollinger Canyon Road, San Ramon, CA.

ConocoPhillips: ConocoPhillips Company (NYSE: COP) is an international energy corporation with its headquarters located in Houston, Texas. It was created through the merger of Conoco Inc. and the Phillips Petroleum Company on August 30, 2002. Headquarters are based in Houston, Texas in the United States, and offices are located worldwide. It is one of the six "supermajor" vertically integrated oil companies.

ConocoPhillips employs approximately 38,400 people worldwide in nearly 40 countries. As of 2006, their 12 U.S. refineries had a combined crude processing capacity of 2,208,000 barrels per day (351,000 m³/d) (BPD) making it the second-largest refiner in the United States. Worldwide, they have a combined crude processing capacity of 2,901,000 bbl/d (461,200 m³/d) making it the fifth-largest refiner in the world.

This is only a small contribution, but why shouldn't it be made?

The effect on tourism dollars for the country as a whole that a single oil spill would have would be undetectable. This is a big country, with lots of tourism sites. Having one tanker spill would destroy a particular area. However, offshore drilling platforms pose no threat to tourism, as they are far enough from shore not to be noticed and not to pose widespread environmental hazards.

Foreign investors invest in the places where they can get the most return for their investment. While oil is the cheapest resource, people will invest in it. When oil is no longer the cheapest resource, there will be no need to drill for it in the first place. For now, oil is the way to go for investors, one simply has to realize that Exxon-Mobil is the largest company in the world by net income. That's a healthy return.

The point is that American oil, when economical to produce, would be cheapest for American consumers. In that way, if there was even the smallest amount of profit to be made from American oil, it would be more likely to be sold in America, rather than exported.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

The phrase "comparing apples to oranges" is used to denote a comparison that is invalid due to the fundamental differences in the two objects being compared. Comparing estimated reserves in the US to estimated reserves in other countries is the same as comparing apples to apples and oranges to oranges.



I never said anything in this entire post about energy independence, as the idea is economically foolish. There is no purpose to using more expensive forms of energy for the purpose of energy independence. There is a reason that trade was invented; it's economically better for everyone involved.

Once again, the estimated amount of recoverable oil is much different than proven reserves (it would help significantly if it wasn't illegal to even look for oil)

http://www.aei.org/publications/filt...pub_detail.asp

The fact is there is a lot of energy to be found if politicians will allow it to be found.

Today it is illegal to look for oil and gas in the Atlantic off the United States.

It is illegal to look for oil and gas in the Pacific off the United States.

It is illegal to look for oil and gas in the eastern Gulf of Mexico.

It is illegal to look for oil and gas in northern Alaska.


There is also the special economic situation about monopolies that would make domestic oil more successful. The problem with monopolies is that they restrict supply and competition to make a profit. That profit makes the oil more expensive. This allows for any oil that is made outside of the monopoly to be more competitive in the market, even if it costs somewhat more to produce on a basic level.

I added speculation as a factor that would be helped by increasing domestic production simply because I got many replies that said something like, "supply has nothing to do with the price of oil, it's all the speculators fault." Whether or not speculators have anything to do with the current upward trend in the price of oil, domestic drilling would help.

Oil produced outside of the monopoly drives at the monopolies control over price forcing the price back to the market value. It's not a terribly complicated economic concept to grasp.

Here's something in that part of your post that you might have missed, "under lease." Even if they leased away all that land that the oil companies wanted and the oil companies did nothing, the government would be making money off of the companies. In addition, in the terms of these leases are requirements that the oil companies develop the oil. When these terms are violated, the government acts and offers the lease to someone else. http://www.reuters.com/article/domes...BrandChannel=0

Don't throw strawmen at me. No one on this earth is entitled to anything.

You say it's a seller's market? You are 100% right. That's why we need to get in the market as a producer!



Having a huge oil reserve does not affect your price of gas. Using your huge oil reserve does.

Quote:

We have three options available to us:

It's not about advocating domestic drilling, it's about allowing domestic drilling.

Today it is illegal to look for oil and gas in the Atlantic off the United States.

It is illegal to look for oil and gas in the Pacific off the United States.

It is illegal to look for oil and gas in the eastern Gulf of Mexico.

It is illegal to look for oil and gas in northern Alaska.

You can't touch the oil shale. Not legally.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

Schwarzenegger slams offshore drilling "politicians".

Whether the cost of drilling is high or low, if the net gain is positive, then drilling would be economical for the oil companies and they would drill, increase domestic supply, which would in turn eventually affect price. If off-shore drilling was so expensive that oil companies couldn't make any money off of it, then they would not drill if it was legal or not. Having a moratorium on off-shore drilling doesn't do anything except interfere with the free market, which would decide if drilling was economical. In other words, there is absolutely no need for a ban on it, regardless of what the effect on price would be.

While there is much debate on whether or not speculation actually has anything to do with the rising price of oil, domestic drilling would be even better for the price if it was, and it would still be good is speculation had nothing to do with the price. First of all, speculators get into the market because they think that the price is going to continue to rise, so if they buy today and sell later on, they can make a profit from doing almost nothing. By buying up the oil however, they further increase demand, and therefore the price of oil, which in turn further fuels speculation because it appears as though the price is continuing to rise even faster. By even just saying that we would begin to drill, speculation would

Newt has another suggestion: dump some of the Strategic Petroleum Reserve into the market for an immediate reduction in price.


The only possible thing that could be a "quick fix" would be the impact on speculation. Because this is disputed, no one really talks about a "quick fix" solution. Drilling is a long term solution.

Off-shore drilling would have no effect on coastal tourism. If you are wondering about the actual impact of the platforms themselves, then see this: http://www.mms.gov/omm/pacific/lease/lease.htm
They already have offshore platforms for mineral mining.

If you are wondering about the actual affect of having oil-drilling platforms, then you should know that, even in disaster, they have almost no effect on the environment. When they do have an effect, it is usually trash from the platforms washing up on shore, not oil spills or any extremely damaging environmental hazard.

http://query.nytimes.com/gst/fullpag...pagewanted=all

Let's take a look at some beautiful Texas beaches, a place where off-shore drilling is commonplace and hurricanes ravage:

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

You may want to avoid using these comparisons in the future. Your second link points out a specious comparison you've made by comparing estimated reserves against proven reserves.

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Toodley-doo,
Maggie.

Both of the figures for the Middle East should have been in large type, but I included proven reserves for the Middle East partially to demonstrate the effects of actually looking for oil. In the US, it is actually illegal to even search for oil in many places. That is one reason why the difference between our proven reserves and our estimated reserves have such a large difference when compared to that same difference in the Middle East where searching for oil is one of the main things that their governments focus on.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

In response to the question "Why would the government prevent domestic drilling in the first place?" I strongly suggest that everyone watch an 8 part video series on YouTube by a man named Linday Williams. It is called The Energy-Non Crisis. I watched it quite a while ago but I will attempt to post a brief summary of his ideas.

Basically...

When the United States first began buying crude oil from countries like Sudan, a deal was made. The United States agreed to buy large amounts of crude oil, instantly making these countries extremely wealthy. In exchange, these middle eastern countries agreed to; 1) Denominate all oil transactions in US dollars and 2) To use a percentage of their profit to buy the increasing US national debt.

By keeping all oil transactions in US dollars, the US hoped to keep the dollar strong in the world market. Thus far, in general, this has worked. However, some very large oil companies (I forget which but I can find out if anyone wants) have stated that they are going to begin denominating their oil transactions in Euros.

The US debt is increasing at a terrifying rate. This is the true reason that the US government will not and cannot allow the oil fields on the North slope of Alaska to be drilled. If this were to happen, all purchases of oil from the middle east would effectively come to a halt. This would mean that those countries would no longer be buying the national debt. Put bluntly, American citizens are paying off the national debt in a deposit box called a gas pump.

Other topics that he talks about are the World Bank (who he claims rules the world and is making unbelievable profits off of oil) and Iran.

I've probably mixed up details and missed important points and for that reason I strongly suggest that everyone watch the video series. It will catch your interest, I promise. The series takes about an hour to watch in its entirety but it really is worth watching.

Istigkeit

Whatever economist came up with that deserves to be fired.

That has the exact opposite effect. By buying oil from other countries, we screw up our balance of trade by importing more than we export. Money flowing in or out of a country is the single factor that determines the value of a currency. So by not drilling and relying on imports, we have only hurt the dollar.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises