The Case for Drilling

Democratic presidential nominee Barack Obama has criticized the notion of drilling for oil on the continental shelf and in Alaska, saying that the benefits are dubious and the costs are too great. Instead, he has proposed fast-tracking alternative energies as a means of transitioning away from foreign dependence on oil. But there are discrepancies between these views and the realities of the situation. Without a firm understanding and clear perspective on the topic, there is no possibility of putting forth a lucid policy.

In 2005, Obama said, "the rest of the world is already moving away from oil," and "our demand is about to jump 40% [over the next 20 years]". Before we go any further in this discussion, allow me to point out that a 40% increase in 20 years equates to an average annual increase of less than 1.75%. To give a contrast from the CIA World Factbook's 2007 estimate, the US has a 2.2% annual GDP growth rate. In other words, the economy produces sustained growth of 2.2% annually, while oil demand will increase only 1.75%. In an economy that is supposedly based around oil, does that truly represent an increase in oil demand?

The fact is that US demand for gasoline in absolute terms has been on the decline since mid-2007. If the trend continues, 2008 would be the first year in 17 years that has seen annual gasoline demand go down. In fact, in a year-over-year comparison, 2008 shows American consumers demanding over 100 million gallons less each month than one year prior. Why is this? Is this because of some policy advanced by the reigning Democrats in the legislative branch? No. Is it because of the words of Senator Obama regarding our so-called dependence on foreign oil? No. Could it be the invisible hand of the free market? An increase in prices causes consumers to change their buying habits.

In all fairness, Senator Obama could not have predicted in 2005 that US gasoline consumption would decrease two years later. Or could he? Adam Smith would have predicted it back in 1776, so perhaps one should consider Obama’s fundamental lack of understanding where it comes to the free market. One can also divine a lack of understanding when in the same speech he said that China is going to be using more oil (driving up demand and prices) and China is going to be using less oil (by making more fuel-efficient vehicles). It reminds me of his off-the-cuff solution of checking your tire pressure to save oil. Sure, the Energy Department says you can save as much as 11 cents per gallon by inflating your tires to the recommended pressure. But didn’t Obama oppose the suspension of federal fuel taxes, which equate to 18.4 cents per gallon?

Clearly, this discussion is not about how to save American families from high prices at the pumps. More likely, it’s about an agenda to transition away from fossil fuels at any cost. To quote former Democratic Presidential candidate Tom Vilsack, “We should be moving away from oil.” Why does the Left want to get away from petroleum altogether? Some would argue that it is the environmental impact of burning oil that leads this push. However, all the alternatives to oil that I have seen would lead to increased emissions (please, someone from the Green Nation send me some information if I’m wrong about that). Some would argue that it is the finite nature of the resource. However, this argument loses steam when you consider the resource becomes more abundant when avenues for exploration and extraction are opened up. Some would argue it is because of the foreign origins of oil, an argument that is also negated by the opposition to domestic drilling. Some even say this country has an oil addiction, which is akin to saying humans have a water or oxygen addiction. Oil has been one of many necessary components to keep America competitive, strong, and moving forward. Perhaps this is why the push is there. Perhaps those eager to apologize for America’s strength see the removal of oil as a way of grinding the American machine to a standstill. While I can’t speak for hidden or ulterior motives, the idea that domestic oil exploration is somehow bad or wrong doesn’t hold up to scrutiny.

The most consistent argument put forth by the Left against domestic drilling is that the effects would not be felt for five to ten years. This figure is thrown about like gospel, but what can anyone tell us about why it will take that long? There is already a petroleum infrastructure in place, and it includes everything from inbound crude to refining to domestic distribution to retailers on nearly every corner. Can the same be said for these mysterious “alternative fuels”? No. The public’s access to E85, hydrogen, and biodiesel is slim-to-none in most parts of the country. In fact, a recent internet search found no public sale of E85 anywhere within 200 miles of this desk. So, despite the presence of vehicles with the sharp-looking “FlexFuel” logo, they are buying good old regular unleaded like the rest of us.

The only piece of the infrastructure that doesn’t currently exist is at the top. Oil has to be found, drilled, extracted, and delivered to a point in the existing supply chain. If the ban on drilling were lifted, a company with a lease to drill in ANWR or on the continental shelf has plenty of incentive to expedite this process. Would it take five years or more? I honestly don’t know, but this should not be a deterrent to starting the process. It’s better to know there will be relief in five years than to have no relief at all. And, since the speculators have come under such fire recently, the development of new drilling operations would have its effect in the futures market first.

Finally, the argument has been raised that says much of the oil currently extracted from Alaska doesn’t come to the US, so new drilling would have no effect on our gas prices. This would be true, except that this is a global market. If the sum of the Alaskan oil went directly to East Asia, then East Asia would inevitably purchase less from Canada, for example. Canada’s surplus would lead those producers to lower their prices to clear inventory. The lower price of Canadian crude would lead to someone else buying it instead of what they are currently buying. Thus, over time, the world oil inventory increases, and prices go down.

Don’t misunderstand. I acknowledge that petroleum is a finite resource and that alternatives will need to be developed. I recognize that conservation of finite resources is good policy. But the premature moratorium on oil serves no purpose. Drilling for new supply is the bridge to new ideas and technologies. And the transition away from oil must not be a mad rush to mediocre substitutes, but rather an intelligent march toward a genuinely better alternative. Sorry, Senator Obama, but that right there sounds like change I can believe in.