Wednesday, June 18, 2008

Is Offshore Oil the Answer?

Before we delve into this question, we must first understand the history of the mess we are in with regards to the oil price spike.

I was recently attending a discussion by a representative of the gas and oil industry who covered the topic of oil output versus price, and why the oil/gas price spike began.

He began by showing a chart, representing the fixed price of oil based on supply from US wells.

He then made a comment that has to be retold: After Katrina and Rita, we have not been able to open up our Gulf of Mexico wells.

That was the key. The oil industry's inability (or unwillingness) to open those wells due to fear of continued storms (and the low cost of oil at the time to cover any future losses) created the first artificial spike in the oil and gas prices. Since then, subsequent drop in oil production in the middle east and throughout the United States has driven the prices higher yet.

Now Congress is being asked by President Bush if they will allow continued exploration off the coasts of the United States.

I say, let them. They should not have been stopped in the first place... assuming they have adequate protection for marine life and against spills, especially in sensitive areas.

Not to mention that the very oil that the US is unable to drill due to Congress, China is drilling. That is right. China is drilling off the coast of the United States with the help from Cuba. China is tapping into the United State's oil fields while we sit by and do nothing. There is something wrong with that picture.

There is one other problem with the oil crisis that must be spoken. In watching congressional hearings on CSPAN (yeah, I am one of the few who actually watch that channel), I noticed that the oil executives had a common theme (let us develop). They wanted to be able to explore and build new refineries... that comment struck a chord with me. Are the oil monopolies holding Congresses feet to the fire by way of artificially high fuel prices to get access to these additional fields?

If so, this is criminal. You are putting the very life of the country in jeopardy for your own gain, which I amount to holding the US hostage for a ransom. If this is, in fact, the case, I hope to see a drastic hammer falling in favor of the US people.

Until such time that we can sort this mess out, let us open the capped wells in the gulf, and continue drilling in new offshore fields.


  1. Offshore oil drilling makes sense if, like you said, the ocean and marine life are protected.

    That graph, though? Any chart without labeled axes and a definition and source of the data is useless. It looks like BS. Any careful consumer of information considers this a big warning flag.

    Demand for oil is also growing, especially in China and India, and demand is not as elastic as most commodities. A zillion things factor into this high price of oil. If someone is manipulating the market to increase prices for every thing, like you say, he should be prosecuted if possible. Meanwhile, at least the high prices are promoting more sustainable choices by the American people, the few of us who have those options.

  2. Jessi - I should have placed a disclaimer that I was recreating the chart from memory... I did not pay attention to the axis, other than one wasa cost, one was wells open, which I superimpsed onto the chart for clarity.

    There is definately a correlation to increased demand, which most likely is the cause for the shape of the curve (in my memory of the discussion).

    I was merely attempting to show the relation as it directly related to decreased production.

    I am 100% in favor of full tax credits for people to shift to solar powerd homes and fully electric cars as they become available. I would go so far as to say that 100% of the cost will be covered in the form of rebates and tax relief up to the cost of the installation (as deemed appropriate - i.e. one house cannot endeavor to build a super power plant on their rooftop that is in excess of a standard power coverage with adequate technology)

    It is complicated issue, but one that I would argue is imperitive as we move towards empty oil wells.

  3. As well, the red dashed line moves left/right based on supply/demand. As the demand outweighs the supply, the lines slides right. This is where the prices are higher due to less wells being in operation, artificially. So the demand would still drive the price higher, but at a different price discriminator due to the inaction of re-opening the wells post-Katrina.

  4. oh, okay, that makes sense about the chart.

    I totally agree with you about tax incentives for renewable energy sources and more efficient cars and houses. And that's what Obama's plan reads like to me... although McCain does seem to have a clue about this too. It is one of McCain's stronger positions, especially his willingness to expand nuclear power.

    Your point about another country draining the oil patches if we don't is a good one.