Democrats distort oil drilling debate
The issue isn't about lowering gas prices today but securing oil supplies for the future.
NEW YORK (Fortune) -- "I think it's important for the American people to understand we're not going to drill our way out of this problem. It's also important to recognize if you start drilling now you won't see a drop of oil for ten years, which means it's not going to have a significant impact on short-term prices." - U.S. Senator Barack Obama, Aug. 8, 2008
If Senator Obama - as well as every other leading Democrat who's uttered some variation of the above - merely wanted to remind the American people that there are no easy answers to the ongoing energy crisis, I'd say bravo to them. Washington can't just snap its collective fingers and bring back $1.50-a-gallon gasoline, yet too many Americans seem to think otherwise.
Unfortunately though this is not the point the Dems are trying to make. They're using the drilling-takes-too-long argument as cudgel against those who want to lift the ban on offshore drilling and end the moratorium on oil shale production in the American West. They say there's no point in allowing more drilling if the oil won't hit the market for five or ten years.
There is a thoughtful argument to be made that oil is bad for the environment and that keeping gas prices high is the best way to promote alternatives and wean consumers off a harmful habit. It's not an argument I happen to agree with, but it's one I can respect. Of course, voters don't want to be told that $4 gas is good for them, which is why you no longer hear Democrats (there are some Republicans too, like former Bush administration economist Gregory Mankiw) pushing for higher gas taxes. Instead, oil-hating pols have invented a bizarre new litmus test: instant gratification.
Thing is, if Congressional Democrats are really going to oppose any energy initiative that doesn't yield quick results, then they'd better rethink their support for alternative energies like wind and solar too. Wind projects can take years to get off the ground. Oilman T. Boone Pickens announced his huge Texas panhandle wind farm in 2007, but the project isn't expected to be up and running until 2011.
Solar suffers from a similar problem. Planning and constructing a commercial-scale solar installation can take up to two years, says Dr. Gerald Fine, CEO of solar company Schott North America. Not only that but, but the manufacturing of photovoltaic panels is incredibly energy intensive, which pushes the time frame for positive results back even farther. According to the National Renewable Energy Laboratory, it takes three or four years for PV panels' energy output to exceed the amount of energy used manufacturing them, and even that estimate may be optimistic. Solar skeptic Howard Hayden, a retired physics professor at the University of Connecticut, accuses NREL of fuzzy math and claims that the real number is closer to 12 years.
Whoever's numbers you believe, the fact is that any investment in solar today won't pay energy dividends for a number of years - just as is the case with offshore drilling. This is not to say that businesses shouldn't invest in solar or that Congress shouldn't extend the solar tax credit which is set to expire at year-end. They should. After all, if instant results were to become the basis for all public policy, there would be little incentive for schools to their upgrade middle-school math and science curriculums (why bother, since 12-year-olds won't hit the work force for another ten years) or for cities to enforce smoking bans at nightclubs populated by twentysomethings (they won't get lung cancer till they're middle-aged, so who cares, right?).
It is government's job to think long term, which is exactly why Congress should allow more offshore oil exploration. I've already written in this space about the absurd moratorium on oil-shale production. As far as offshore drilling goes, what's most frustrating is we can't even have an informed debate.
There may be very little undiscovered oil in the outer continental shelf (OCS), or there may be a multiple oil fields the size of Tupi - the monster field that Petrobras discovered off the coast of Rio de Janeiro in 2006. We just don't know how much oil is out there because oil companies have no incentive to do the costly seismic surveys required to find out.
"The fact is that much of the data we have about potential resources in prospective OCS areas is very limited - the equivalent of a few snapshots the size of postage stamps - because it's based on technology that is more than 25 years old," Chevron CEO David O'Reilly said last year. "When we consider the development of domestic oil and gas resources in the OCS, we've created a kind of Gordian knot in the policy arena. We've become paralyzed in a debate confined by fixed positions and fuzzy data."