Written by CFIF
August 22, 2008
Recent Moves toward Greater Domestic Drilling Have Dramatically Reduced Energy Prices in Just One Month
According to Senator Barack Obama and Congressional liberals, allowing more domestic drilling won’t have any impact on energy prices for ten years or more. That is incorrect.
In the month since President Bush rescinded the executive order prohibiting drilling on the Outer Continental Shelf (OCS) and the Arctic National Wildlife Refuge (ANWR), the price of oil has already plummeted. From its record high of over $145 per barrel in July when Bush signed the order, the price has tumbled some 21% to $115 in one short month.
This is because the market price for oil partially reflects future supply expectations. Accordingly, any movement toward reliable, secure, domestic sources of oil and gas sends the signal of increased future supply. This helps offset current uncertainties surrounding such volatile oil- and gas-producing areas as the Persian Gulf, Venezuela, Russia and Nigeria, thereby assuring energy markets of a more dependable flow of future energy.
In other words, potential disruptions in the aforementioned regions undermine energy source reliability and add to the current market price. In contrast, taking steps to assure a greater supply of safe, reliable, domestic sources in such places as ANWR and the OCS bolsters energy source reliability and helps reduce the market price.
Obviously, President Bush’s wise decision isn’t the sole reason for oil’s recent decline. A stronger dollar, the slowing world economy and reduced demand have also played a role. But reality is that the world economy was already slowing before July, and demand was already being reduced while the price of oil continued its march toward record highs.
Furthermore, keep in mind that the price of oil has declined since President Bush’s order despite such new geopolitical turmoil as Russia’s invasion of Georgia, which sits in an energy-rich area and is a critical conduit of oil.
You’ve got to give Obama and Congressional liberals like Nancy Pelosi credit for trying, though. After all, in the ongoing debate about whether to allow more domestic drilling to reduce energy prices and America’s unhealthy dependence upon foreign oil, they’re running out of rationalizations.
Originally, they found it safe to oppose domestic drilling in places like ANWR on the basis that it would spoil beautiful, pristine environments. That excuse was of limited value, when voters realized that ANWR is a desolate, distant moonscape the size of South Carolina, where only an area the size of Dulles International Airport would be drilled. Voters also realized that the threat of horrendous offshore oil rig spills on the OCS is extremely remote, since even Hurricane Katrina failed to cause such catastrophes in the Gulf of Mexico.
Drilling opponents later contended that oil companies aren’t drilling in oil-abundant areas on which they already hold leases. But voters quickly wised up to the reality that the leased areas on which drilling hasn’t occurred simply don’t yield enough oil or gas to justify enormous expenses to extract them.
Faced with this inconvenient truth, so to speak, Senator Obama retreated to arguing that more domestic drilling is a mere “scheme” that won’t have any impact for a decade or more. Unfortunately for him, events over the past 30 days have obliterated that misrepresentation as well.
Now, pundits are rationalizing that the recent oil price decline is the result of Americans driving fewer miles or buying fewer sport utility vehicles. And indeed, Americans drive 3.7% fewer miles than they did one year ago, and we purchased 7% fewer SUVs than one year ago. But those declines have occurred over an entire year, and hardly account for a 21% drop in just one month since July.
Indeed, American consumers began reducing their miles driven back in November 2007, yet oil and gasoline prices continued to ascend until just last month. Moreover, the price decline occurred during the height of summer vacation driving season, not an off-peak driving month. Therefore, one can’t attribute oil’s rapid decline to Americans abandoning the highways.
The simple fact is that greater domestic energy production will substantially assist America’s effort to reduce energy prices that are burdening American families, and decrease our dependence upon foreign energy sources. Voters have come to this realization, and now support domestic exploration by widening majorities.
Rather than face this reality and do the right thing, however, Nancy Pelosi and Harry Reid decided to call a recess and abandon Washington in order to obstruct progress on this matter. But neither their parliamentary schemes nor Senator Obama’s mischaracterizations will succeed in obscuring the reality that we must drill here, drill now.
They are out of excuses. Now, they must finally act or face the consequences in November.