Friday, March 18, 2011

Oil & Gas Myths

President Obama held a press conference today to discuss rising gasoline and oil prices. Gasoline at the pump now costs an average of $3.50 per gallon nationwide, and experts project prices to eclipse $4 per gallon this year, possibly by the beginning of the summer driving season.

There is no question that President Obama is a gifted orator.  But instead of providing fresh ideas that most of America is looking for, President Obama recycled statements and arguments that have all been thoroughly debunked, but that have been repeated often enough that many people just blindly accept them as being fact.  Perhaps the President is one of them.

Here are the three biggest myths from President Obama’s remarks:

■“We can’t escape the fact that we control only 2% of the world’s oil.” This is a common refrain among anti-drilling Democrats and environmentalists, and it’s repeated enough that many people accept it as true. In reality, it’s 100% false. The number comes from a highly conservative estimate from the Energy Information Administration totaling America’s proven reserves where we are already drilling. It does not include the 10 billion barrels available in the Arctic National Wildlife Refuge. It does not include most of the 86 billion barrels available offshore in the Outer Continental Shelf, most of which President Obama has placed under an executive drilling ban. And it does not include the 800 billion barrels of oil we have locked in shale in Wyoming, Utah, and Colorado. Those shale resources alone are actually three times larger than the proven reserves of Saudi Arabia, so the claim that the U.S. only has 2% of the world’s oil is clearly false.

■“Industry holds leases on tens of millions of acres both offshore and on land where they aren’t producing a thing.” President Obama adds to this whopper by saying he wants to “encourage companies to produce [on] the leases they hold.” While this sounds like a common sense fix, it’s actually just blind rhetoric reserved only for people with a shocking ignorance of drilling. You can read more about this here and here, but it basically boils down to this: A lease is for exploration and production, not just production, and because oil is not equally distributed across the globe, one parcel of leased acreage may not hold any oil. Moreover, due to the circuitous and needlessly complicated permitting process, it can take years for companies who own a lease to complete their exploration activities. To get to the production phase, it could take as long as ten years. Ironically, President Obama wants to tax companies for not producing on their leases, even if the federal government’s refusal to grant permits is the reason why those companies are not drilling.

■“Last year…our oil production reached its highest level in 7 years.” This is pure spin. President Obama is deliberately trying to take credit for actions unrelated to his policies. The increased level of production is due to the actions of previous administrations and production in the Dakotas where most drilling is occurring on private land. By contrast, the Energy Information Administration projects that there will be a decline in production of 220,000 barrels of domestic oil per day in 2011, and in 2012 America will produce 150 million fewer barrels in the Gulf of Mexico, all because of President Obama’s policies to discourage or ban domestic drilling. In addition, President Obama’s drilling moratorium (and subsequent refusal to issue drilling permits) has forced at least 7 rigs to leave the Gulf and sign contracts in other countries, taking much needed jobs and revenue with them.

The sad truth is that our nation’s energy policy is a joke.  We subsidize corn based ethanol in a manner that guarantees we will inflate the price of food and energy and completely ignore sugarcane based ethanol that has proven to be more economical in large scale operations in Brazil.  We drive high paying oil & gas exploration, production and service jobs out of the country.  We allow natural resources on Federal land in the west to be exploited for little or no money, and do everything in our power to prevent exploration offshore everywhere but the Gulf of Mexico.  We embrace alternative energy, but don’t seem to want to make the hard choices on prioritizing our bets so that we get the most bang for our buck.  I am not a big Boone Pickens fan, but at least Boone puts his money where his mouth is, while the Federal government seems to put its money where its influential members of congress are.

I am not an Obama hater.  I really do think that he is an extremely gifted speaker.  And yes, he can propose new initiatives.  But he cannot appropriate a dime.  The President only proposes a budget.  Congress spends the money.

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