Oil

Tuesday, March 13, 2012

It would seem to me that the American people need to be a little more careful when it comes to choosing a new president. Currently in vogue is choosing a presidential candidate, all too many of the other high political offices too, that has studied to be a lawyer. Law is an honorable profession but our leaders need to be better versed in economics. The ones in power since about 1932 evidently haven't been connected to reality when it comes to spending. Any reasonable person understands that they can only spend what they earn and if you borrow money it has to be paid back. Any reasonable person that is except for the current crop of politicians.

Our current administration has decided that using oil to power our economic engine is somehow bad. They can think of all sorts of reasons why our use of oil and coal for power should be drastically reduced.

Alternative power is the new buzzword but so far all are way too expensive to be practical. Nuclear power to generate electricity, the cheapest safest practical way, is a no no because "they" are convinced that nuclear will make us glow in the dark or some other dumb excuse.

It is next to impossible to develop more hydro-power because self styled, earth friendly, ecologists are against damming any river or stream. That leaves us with oil.

Now President Obama and his liberal elite administration are convinced that if we can just get the price of gasoline up to the levels that the Europeans pay alternative power could better compete. I've driven in Europe and their narrow crooked streets and short distances to travel are a whole different world. Here in the West we have vast distances to travel so the cost of transportation is a world of difference from commuting in Europe. High fuel prices will put a huge damper on business here and obviously there is no current viable "alternative" source of fuel to meet our everyday needs.

President Obama, for whatever reason, has put a real restriction on the U. S. developing more oil production. He has almost closed all off shore exploration, closed all interior government land and won't allow the Arctic National Wildlife Reserve (ANWR) to be developed. What he hasn't been able to stop is exploration and production on private lands but I'm not too sure that he won't find a way to stop that too if we give him another four years to try.

This weekend President Obama spoke to the people to tell us that part of the rise in gasoline prices is due to unrest in the mid-East. He quoted 470,000 barrels of crude per day drop in production in Syria, Yemen and Sudan alone. He is correct in stating that those drops affect price on the world market but he neglected to mention that his own restrictions on drilling off shore in the Gulf of Mexico have cut production by at least 500,000 barrels per day. One can only imagine what the price of gasoline would be had there not been a surge in domestic production in spite of his own policies designed to curb production.

The President and his green allies do have a point though. The world price for oil is now set by the Organization of Petroleum Exporting Countries (OPEC), and they don't have our best interests in mind. The Saudi Kings and the other dictators of OPEC can only see more riches by ever escalating the price of oil by controlling production. With oil revenue they hold tight to their reign of power and become fabulously rich. Of course the common folk in their sheikdoms see little benefit from the largess of oil revenue but those in power fear the common man and insist on keeping him in a perpetual state of poverty.

Alaska had a better plan. When oil was discovered and developed on state lands in Alaska the citizens of the state were granted a share. Oil revenue pays for the entire Alaskan state government and what is left is divided among the residents of the state. The current allocation is somewhere around $1015 for every man woman and child living there. Think for a moment what a similar allocation to each resident living in the oil producing countries of the mid-East would do for those poor people. That whole fractious part of the world would undergo a huge change and the world would only be the better for it.

How can we get there? The answer is in economics, obviously not the strong suit of the politicians that we have chosen to put in charge. In Sarah Palin's words we should "drill baby drill!" We need to develop all we can on our off shore ocean areas, and on public lands including ANWR. Allow the XL Pipeline and more like it to be built.

How much would be available? Well the Institute for Energy Research states that we have more than 1.4 trillion barrels of oil that is technically recoverable with existing technology. What that means is the United States has more recoverable oil than the rest of the non-North American world combined.

When turned loose the United States would be able to produce all of our foreseeable needs and more. A current estimate is enough for 200 years in the future and more is being discovered. OPEC would no longer have a monopoly as they couldn't compete with our domestic oil due to shipping costs. Then price would drop in accordance with supply and demand. Simply turning loose the oil industry would come at no expense to the taxpayer. Actually we would all gain as owner of public lands revenue would flow into government coffers to offset some of the expense of government. Then the problem would be to keep the politician's hands off the new revenue stream and only use it to pay down public debt.

It is a change that needs to happen. Candidate Obama was right, it is time for change but the real change needed now is to remove him from our future. That is the change that we can really accomplish in November. Vote wisely. Still no word from Grannie Annie's Chaplain in Afghanistan.

That is the way I saw it.

Dick Trail

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  • Mr. Trail,

    I find it necessary to dispute some (most) of the claims you have made in this ridiculous article.

    Your statement:

    "Nuclear power to generate electricity, the cheapest safest practical way, is a no no because "they" are convinced that nuclear will make us glow in the dark or some other dumb excuse."

    Reply:

    Supporting Deployment of Nuclear Energy: Since taking office, President Obama has been committed to restarting America's nuclear industry to create new jobs and provide clean power to America's communities. In 2010, the Department of Energy issued a conditional commitment for a loan guarantee to support the first U.S. nuclear reactors in more than three decades. The project, which received regulatory approval in February 2012, is located in Burke, Georgia, and will bring two new Westinghouse AP1000 reactors online, supporting 3,500 construction jobs and 800 permanent jobs. When built, the plant will provide clean electricity to nearly 1.4 million people.

    Your statement:

    "President Obama, for whatever reason, has put a real restriction on the U. S. developing more oil production. He has almost closed all off shore exploration, closed all interior government land and won't allow the Arctic National Wildlife Reserve (ANWR) to be developed."

    Reply:

    The United States: Domestic oil and natural gas production has increased every year President Obama has been in office. In 2011, U.S. crude oil production reached its highest level since 2003, increasing by an estimated 120,000 barrels per day over 2010 levels to 5.6 million barrels per day. In addition, U.S. natural gas production grew by more than 7 percent in 2011 -- the largest year-over-year volumetric increase in history -- and easily eclipsed the previous production record set in 1973. Currently, the United States has a record number of oil and gas rigs operating -- more than the rest of the world combined.

    In November 2011, the Department of the Interior (DOI) announced the proposed 2012-2017 Outer Continental Shelf Oil and Gas Leasing Program, which makes more than 75 percent of estimated undiscovered technically recoverable oil and gas resources on the U.S. Outer Continental Shelf available for exploration and development. The proposed program schedules 15 potential lease sales, 12 in the Gulf of Mexico and 3 off the coast of Alaska. Over the coming months, DOI will be working to finalize the Program, building on feedback received during the public comment period, which recently concluded.

    On December 14, 2011, DOI held the first oil and natural gas lease sale in the Gulf of Mexico since the Deepwater Horizon explosion and oil spill. The sale attracted nearly $338 million in total bids -- about $100 million more than the average for Western Gulf sales over the previous decade. Moving forward, DOI will hold the consolidated Central Gulf of Mexico Lease Sale 216/222 in New Orleans on June 20, 2012. The sale will include all available unleased areas -- nearly 38 million acres -- in the Central Planning Area offshore Louisiana, Mississippi and Alabama.

    Finally, on America's public lands, DOI held 32 onshore oil and gas lease sales during calendar year 2011, offering 1,755 parcels of land covering nearly 4.4 million acres. In total, 1,296 parcels of land were leased -- nearly three-quarters of those offered -- generating approximately $256 million in revenue for American taxpayers, a nearly 20 percent increase in lease sale revenue over 2010 levels.

    Alaska: A balanced and careful approach to energy exploration and development in the Arctic must account for a range of factors including resource potential; environmental needs; and the social, cultural, and subsistence needs of Alaska Native communities. Last year, President Obama issued an Executive Order to establish an interagency Alaska working group, which has since been working to improve the efforts of Federal agencies responsible for overseeing the safe and responsible development of onshore and offshore energy in Alaska. For example, the group has been coordinating cross-agency review of Shell's proposed exploration activities in the Chukchi and Beaufort Seas, reviewing Shell's oil spill response plans, and coordinating a government-wide approach to address spill response issues associated with Shell's proposed activities beginning this summer. Potential sales in the Beaufort and Chukchi Seas off the coast of Alaska are scheduled late in the Proposed 2012-2017 OCS Oil and Gas Leasing Program for the next five year cycle in order to facilitate further scientific study and data collection and longer term planning for spill response preparedness and infrastructure. The proposed program also schedules a potential special interest sale in the Cook Inlet in 2013, if industry demonstrates interest.

    Onshore, the Administration committed to holding annual lease sales in the National Petroleum Reserve-Alaska (NPR-A). Consistent with that commitment, DOI held a sale in December 2011 that resulted in new leases for over 140,000 acres of the Reserve and generated $3.6 million in total bids. Later this year, DOI will hold an additional lease sale and finalize an integrated activity plan that will guide future sales in the NPR-A, while providing for adequate consideration and protection of the Reserve's outstanding ecological resources.

    Your statement:

    "Allow the XL Pipeline and more like it to be built."

    Reply:

    In addition, in February 2012, President Obama welcomed the news that TransCanada plans to build a pipeline to bring crude oil from Cushing, Oklahoma, to refineries along the Gulf of Mexico. This project will help address the bottleneck of oil in Cushing that has resulted in large part from increased domestic oil production, currently at an eight year high. Moving oil from the Midwest to the world-class, state-of-the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production. The Administration has also approved dozens of new pipelines to move oil and gas, including a pipeline known as the Alberta Clipper, which brings oil from Alberta, Canada, to Superior, Wisconsin.

    Your statement:

    "He is correct in stating that those drops affect price on the world market but he neglected to mention that his own restrictions on drilling off shore in the Gulf of Mexico have cut production by at least 500,000 barrels per day."

    Reply:

    Worldwide: On February 20, 2012, the Departments of the Interior and State joined officials from the government of Mexico to sign an agreement on the exploration and development of transboundary oil and natural gas reservoirs along the United States' and Mexico's maritime boundary in the Gulf of Mexico. This Transboundary Agreement removes uncertainties regarding development of transboundary resources in the resource-rich Gulf of Mexico and paves the way for development of common safety and environmental standards.

    As a result of this agreement, an additional 1.5 million acres of the U.S. Outer Continental Shelf will be made more accessible for exploration and production activities. DOI is working with the Government of Mexico to develop common safety and environmental standards that apply not only in the area covered by the Transboundary Agreement, but in the entire Gulf of Mexico. DOI is also continuing to build strategic relationships with other oil producing countries through its leadership in the International Regulators Forum, the Ministerial Forum on Offshore Energy Safety, and the Energy and Governance Capacity Initiative sponsored by the Department of State.

    Your statement:

    "The world price for oil is now set by the Organization of Petroleum Exporting Countries (OPEC), and they don't have our best interests in mind."

    Reply:

    But, there is plenty of speculation as the possibility of strife in Iran, one of the globe's largest crude oil producers, pushes up the price of oil futures, which in turn impact the price of buying crude oil in the open market. As of February 23, 2012 "managed money" held positions in NYMEX crude oil contracts equivalent to 233.9 million barrels of oil-- the equivalent of about one year's crude oil supply from Iran to Western European nations like France, Belgium, Greece, Italy and Spain.

    As Goldman Sachs believes that each million barrels of speculation in the oil futures market adds about 10 cents to the price of a barrel of oil, this means that in theory the speculative premium in oil prices due to speculation is as much as $23.39 a barrel in the price of NYMEX crude oil.

    In turn oil analysts believe that every $10 rise in the price of crude oil translates into a 24 cent rise in the price of gasoline at the pump. Using the 24 cent rise in the price of gasoline suggests that each dollar increase in a barrel of oil equals about $.56 per barrel.

    So, if a barrel of crude oil is $23.39 higher because of speculative action in the commodity markets-- this translates out into a premium for gasoline at the pump of $.56 a gallon. Since gasoline in the northeast is about $3.68 a gallon, this suggests that without any speculation, the cost of a gallon would be only $3.12, a lot more favorable outcome.

    Your statement:

    "Alaska had a better plan. When oil was discovered and developed on state lands in Alaska the citizens of the state were granted a share. Oil revenue pays for the entire Alaskan state government and what is left is divided among the residents of the state."

    Reply:

    About a third of all jobs in Alaska can be traced to federal spending here--and over the past decade the rapid increase in federal spending drove much of the economic growth. Federal spending in Alaska more than doubled between 1995 and 2005, and in 2006 it was $9.25 billion.

    But now federal spending here has stopped growing, and many Alaskans are worried that the economy is vulnerable to spending cuts as the federal budget tightens. This analysis estimates that Alaska could be vulnerable to federal spending cuts in the range of $450 million to $1.25 billion--which could cost the economy anywhere from about 7,000 to 20,000 jobs in the future.

    We estimate potential vulnerability as a range, because it's impossible to predict with any precision how federal spending will actually change. The best we can do is estimate the likely magnitude of reductions, given federal budget problems. Any cuts will likely be made gradually, over time, and recent strength in the petroleum and mining sectors will help cushion the effects. Also, keep in mind that even if spending is reduced, the federal government will still be a major contributor to the economy.

    Every president since Richard Nixon has called for America's independence from foreign oil, but Washington gridlock has prevented action again and again. In order to create a more secure energy future and protect consumers at the pump, that has to change.

    In March 2011, the President set a bold but achievable goal of reducing oil imports by a third in a little over a decade, relative to where they were when he ran for office.

    We are on track to achieving that goal. When President Obama took office, America imported 11 million barrels of oil a day. By the end of last year, that number dropped to 8.4 million barrels per day.

    In the last year alone, in part because of booming U.S. oil and gas production, more efficient cars and trucks, and a world-class refining sector that last year was a net exporter for the first time in sixty years, we have cut net imports by ten percent -- a million barrels a day. And with the new fuel economy standards the President announced last year, we are on pace to meet our goal by the end of the decade.

    Since President Obama took office, America's dependence on foreign oil has decreased every year. In 2010, the United States imported less than half of all oil consumed -- a first in 13 years. In fact, net imports as a share of total consumption declined from 57 percent in 2008 to 45 percent in 2011 -- the lowest level in 16 years.

    http://www.whitehouse.gov/sites/default/files/email-files/the_blueprint_for_a_se...

    http://www.forbes.com/sites/robertlenzner/2012/02/27/speculation-in-crude-oil-ad...

    http://www.charlotteobserver.com/2012/02/21/3080772/once-again-speculators-behin...

    http://www.eia.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_stat...

    http://pubs.usgs.gov/fs/fs-0028-01/fs-0028-01.htm

    http://iser.uaa.alaska.edu/Publications/webnote/Federal_Spending2008.pdf

    -- Posted by Geezer on Thu, Mar 15, 2012, at 9:00 AM
  • Well Geezer you nicely illustrate my point. The increase in domestic oil production is being done in spite of President Obama's roadblocks in place on federal lands.

    Note all the hoops the oil industry has to jump through to develop anywhere. Environmental studies, "spill response preparedness and infrastructure", "social, cultural, and subsistence needs of Alaska Native communities", and on and on and on. Federal regulators in action. Private enterprise could do it all more quickly and less expensive but oh no, grow the federal bureaucracy who contribute nothing but reliably vote democrat is what is most important.

    Dick Trail

    -- Posted by Dusty on Thu, Mar 15, 2012, at 11:50 AM
  • Mr. Trail

    In 2008, then Candidate Obama made the case that oil and gas companies should either "use their existing leases or lose them". They hold millions and millions of acres in oil and gas leases and were not using them. Do you think that might have had anything to do with the increase in the number of oil and gas rigs currently operating?

    As far as your comment about the Alaska Native concerns, it only serves to showcase your lack of knowledge about how the North Slope Oil projects came to be a reality. If the Alaskan Natives had not traded large tracts of tribal lands along the proposed TransAlaskan Pipeline route, the project would still be in the planning stage.

    I don't see oil and gas companies gaining access to ANWR any time in the near future. The Federal Government has opened up a large portion of the Alaska National Petroleum Reserve for exploration and development, which are just West of ANWR and Southerly of Prudhoe Bay. The latest lease offerings were made in Dec. of 2011.

    If private industry can do it cheaper and better, how did we end up with over 250,000 toxic waste sites across every state in our country? Why do so many people have to drink bottled water? Why was the EPA even created if industry does such a fantastic job? You must have forgotten about the dire environmental condition our country was in back in 1970. Rivers that caught on fire, people getting cancer from living on toxic waste dumps, etc., etc. -- Do you really want to go back to the days when industry could do what they wanted?

    -- Posted by Geezer on Fri, Mar 16, 2012, at 8:53 AM
  • Loved your article, Dick!

    Spot on!

    -- Posted by JohnGalt1968 on Fri, Mar 16, 2012, at 9:58 PM
  • Geezer, it's no surprise that the admin geared up the nuclear power program..... after he saw how effectively dangerous is was in Japan, it must have looked like a nice complement to the bottomless pit that we are digging in this country.

    -- Posted by Nick Mercy on Mon, Mar 19, 2012, at 7:08 PM
  • Nick

    I am by no means a fan of Nuclear Energy. On the other hand, I would hate to think where our Navy would be without it. My concern lies with the management of the waste material.

    You and Mr. Trail seem to be at opposite ends in regard to the Presidents policy on Nuclear Energy. Mr. Trail says he is not doing enough and you are saying his proposed policy will lead us further into a bottomless pit. Are you both Conservatives?

    -- Posted by Geezer on Tue, Mar 20, 2012, at 8:15 AM
  • Geezer, our friends have never let facts and figures get in the way of some good talking points!

    -- Posted by goarmy67 on Tue, Mar 20, 2012, at 10:56 PM
  • Mr. Trail

    I ran across an article this morning that I thought you would be interested in reading. It deals with online GED diplomas and what is currently happening in this relatively new industry.

    Would you possibly consider incorporating this issue into one of your future articles? The public would appreciate your opinion on this matter since a GED is a path to the future for so many of our citizens.

    Thanks for your consideration of my request.

    http://redtape.msnbc.msn.com/_news/2012/03/22/10797810-online-ged-seekers-presen...

    -- Posted by Geezer on Thu, Mar 22, 2012, at 9:37 AM
  • *

    Geezer - your links seem to omit the New York Times article that clearly stated that Obama was tacking on elements of nuclear energy to get the Republicans to support one of his earlier energy bills. Even with the "bribe" - the Republicans turned him down.

    Looking at your links and going just one little step beyond that one will find that the proposed nuclear plant is still in the committee stages and will never have shovels hit the ground during Obama's administration. Now to what end would all this huff and puff serve? Would it be a concern for energy independance? Or would it be politicking at it's finest? Is it possible to measure intentions? Or should we stick to measuring results?

    -- Posted by Mickel on Thu, Mar 22, 2012, at 9:50 PM
  • Mickel

    Actually the shovels have already hit the ground. Preliminary construction activities have been taking place since Feb. 2010. Over $4 billion dollars have been spent doing site prep and other preliminary construction tasks.

    The original application for license was submitted in March 2008 during the Bush Administration.

    Would you mind providing some links to your source of data indicating that the project is being held up in some committee and will never have shovels hit the ground?

    Following are direct links to the NRC license approvals - the vote was four in favor and one against.

    http://pbadupws.nrc.gov/docs/ML1130/ML113060412.pdf

    http://pbadupws.nrc.gov/docs/ML1129/ML112991110.pdf

    -- Posted by Geezer on Fri, Mar 23, 2012, at 9:06 AM
  • *

    Very simple Geezer - I googled the local newspaper and read the "progress" being made on an online edition. They didn't seem to share your sunny view.

    So, it looks now like you may credit Bush for greasing the skids on The Sacred Cow's nuclear plant?

    -- Posted by Mickel on Mon, Mar 26, 2012, at 9:58 PM
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