Watch this video. If you get a self-serving, PBS style, thirty-second BP propaganda commercial, enjoy the irony. Remember MSNBC is owned by General Electric.
The clip illustrates an extremely important concept that eludes most members of the U.S. House of Representatives. In the video, Rachel Maddow logically explains why oil, as a commodity, is neither foreign nor domestic. What Ms. Maddow does not emphasize is something that your Congressperson either doesn’t understand or doesn’t want to understand.
American people own the oil when it is in American ground. After an oil company extracts it and puts it in a barrel, the oil company owns the oil, not the American people.
Last week the House voted to speed up off-shore drilling. Somehow our so-called representatives think that more drilling will reduce gas prices. Republicans in the House also blocked an amendment offered by New Mexico Congressman Ben Ray Luján to guarantee that all oil and gas produced from the leases would be sold in the U.S.
Mr. Luján’s proposal was gutsy, but neither side seemed to understand the basic premise–in the United States (except for U.S. government reserves) oil is owned by corporations and sold on the open market.
Do the math.
In 2009 the United States is the third largest producer of oil in the world at 9,056,000 barrels per day, representing about 10.75% of the world’s total production. At the same time, U.S. oil consumption was 19.292 million barrels per day or about 22.9% of the world’s total consumption. The United States would have to increase its production by 113% to match its demand or decrease its demand by 53% to match its production. In other words the United States would have to become an oil producer almost the size of Russia and Saudi Arabia combined to eliminate its dependence on foreign oil. And “drill baby drill” ain’t going to do that.
So how will selling more off-shore leases reduce gas prices? Experts tell us that more drilling will not effect gas prices and proponents for more drilling have not offered any mathematical evidence to prove their case, except for Ayn Randish platitudes about supply and demand.
Let’s say offshore drilling can increase our production–let’s be very optimistic–by 20%. That means we’d be producing 10,867,200 barrels per day (surpassing Russia as the world’s largest oil producer) or approximately 12.9% of the world’s oil.
Here’s where that pesky oil market comes in. If there are 100 shares in the market and we own 12.9 shares, how much influence would we have? Let’s say the market price of oil was $100.00 per barrel and we sell our barrels for $80.00. In this hypothetical the average price of a barrel would be reduced to $97.42. In other words, even a spectacular jump in U.S. production would barely make a dent in world oil prices.
Indeed, a 2009 Energy Information Administration study found that opening up waters that are currently closed to drilling off the East Coast, West Coast and the west coast of Florida would yield an extra 500,000 barrels a day by 2030. A corresponding increase in world production would wipe out any effect of increased U.S. production.
There is no “we” here.
All of the math above assumes that somehow “we” own the oil.
Drilling proponents makes the same faulty assumption. In an opinion piece for The Daily Caller, “Actually we can drill our way to energy security,” Senator James Inhofe (R-OK) cites a Congressional Research Service study that concluding America’s combined supply of oil, coal, and natural gas is the largest on Earth.”The CRS shows the full, accurate picture of America’s reserves — and shows that we can produce our way to energy security. CRS shows more than just our proven oil reserves, which are a modest 28 billion barrels. The only way to estimate proven reserves is to drill.”
Aside from the fact Mr. Inhofe seems to envision an American that looks like Huntington Beach, California in its oil soaked heyday, his argument still assumes that Americans will benefit from increased production when in fact, Americans have no direct control over the world oil market.
Certainly oil companies will profit from increased drilling, but the only “we” that benefits in Mr. Inhofe’s vision is a “We are the world” we, because, as other nations increase their demand, American oil companies will be supplying it. Somehow I don’t think that’s what the Oklahoma Senator wants to sell.
As stated earlier, oil companies own the oil after it is extracted. And oil is sold on the open market without regard to who buys it. There is no “we” here. We are at the mercy of so-called market forces. Anyway, why would a rapacious corporation like Exxon sell its oil for less than the market price just to decrease their gas prices? For the same patriotic reasons that it, a U.S. corporation, hides money in off-shore accounts to avoid paying U.S. taxes?
You only get three choices.
U.S. representatives who support more domestic oil drilling are either stupid or they’re crooks or they’re stupid crooks.
Some of our representatives are just plain dumb as a box of shale. They may even believe that American oil can be sold at Mom and Pop’s Gas-It-Up. Certainly arguments based on statistics are the domain of pointy-headed liberals. Yes, some of our representatives are stupid.
Most of our representatives, however, are not stupid. They’re paid very well to prop up oil companies and are willing to use any jingoistic argument to do so. Senator Inhofe has been paid $459,750.00 over the years to promote oil company interests and ignore basic facts.
In fact, the chief sponsors of the recent bill to expand oil drilling in the Gulf of Mexico and open the coastal waters of Virginia for exploration have received more than $8.8 million combined in campaign donations from the oil and gas industry. Assuming that these representatives understand that the recent bill makes no sense given the world oil market along with the mathematical certainty that it will not impact the cost of gas, there’s only one conclusion possible: they’re crooks on the take.
Finally, there’s a third possibility: The Michele Bachmann types who only understand the mathematics of pocketing the free cash.
What do you get out of it? Same old gas prices and more greasy pelicans.