Bush – Cheney and the Energy Crisis

by Gordon Cooper

From Broader View Weekly, August 15, 2008

My fellow columnist and others have made it clear that they believe the current gas prices are due entirely to the malevolent manipulations of a very few powerful people. Conspiracy theorists and purveyors of paranoia will often use vague generalizations and twisted facts to generate fervor among those of us who are too lazy to seek out the truth.

A recent press release from the office of Congressman Maurice Hinchey echoes the claims made by Senator Harry Reid and others that see bogeymen hiding behind every gas pump. The oft repeated yet never substantiated mantra from Hinchey, Reid, et al, is that oil companies have made trillion dollar profits and they are still receiving subsidies from the government. They also claim that removing the congressional ban on drilling the Outer Continental Crust (OCS) or the Arctic National Wildlife Refuge (ANWR) will not result in lower prices – and then only insignificantly - until 2030. They assert that the energy policy of President Bush and VP Dick Cheney have caused these high gas prices.

I believe that it is important to do a little exploration before I accept the word of any politician or fear-monger, so I let my mouse loose and clicked my way to a few fact-checking websites. It was a very interesting and enlightening exercise. If you will allow me to take a little bit more of your time, I will tell you what I learned.

“The oil companies already own drilling rights to 68 million acres of federal lands, onshore and offshore, that they haven’t touched. 68 million acres that have the potential to double America’s total oil production.” Said Barack Obama. Hinchey has repeated this mantra in his recent press release and others in the Democrat party echo the claim. But is it factual?

According to factcheck.org, the lands are more accurately described as undeveloped rather than untouched. The facts are that 25.7 million acres of federal land are producing oil and the Bureau of Land Management (BLM) lists regulatory hurdles and environmental concerns as obstacles that have to be met before drilling can begin. There is also much activity going on in those acres that would not qualify as production, yet is crucial to the five-step life cycle of a well. For 2006, BLM reports that there were 6,738 applications in process for drilling with 4,708 holes begun and 3,693 holes where drilling had ended. So, a total of more than 15,000 holes that were being proposed, started or finished, yet they are classified as non-producing. As you can see, Mr. Hinchey and Senator Obama have not told you all the facts about those 68 million acres.

Now let us examine the issue of subsidies and tax breaks the oil companies receive, shall we? The claim by Senator Obama, which has been repeated in various forms by many, refers to H.R. 6, the 2005 energy bill passed by both houses in which $14.3 billion in subsidies was given to “energy” companies. The facts are, according to the nonpartisan Congressional Research Service, that the majority of those funds went to nuclear power, energy-efficient cars and buildings, and renewable fuels. Only 2.8 billion of those dollars went to oil companies. But… here is the untold fact… the same bill levied new tax increases totaling 2.9 billion for a net tax increase of $300 million over 11 years.

The next assertion in Mr. Hinchey’s press release concerns the drilling in ANWR and the OCS. According to Hinchey and Obama and others, there is no need to drill now because the oil would not reach the market for several more years, hence the effect on prices now would be negligible. Let’s examine that for factual accuracy shall we?

If, say, you are an oil sheik in Saudi Arabia, and you are sitting on a stretch of sand with oil worth $120/barrel today, but you hear that an increase in supply will be diminishing the price of that oil in, say ten years or so, wouldn’t you be wise to open up the valves and get your high dollar price now? However, if you know that the supply from another source, such as the good old U.S.A., was never going to increase, it would be more profitable for you to keep sitting on that oil and watch the price rocket higher and higher.

If investors and speculators see no increase in supply on the horizon, they will drive up the prices, but if they see the possibility of 18 billion barrels from the OCS and another 10 billion barrels from ANWR (both conservative estimates) coming down the pipeline, prices would fall.

I could go on with more facts, but space is limited here, so I will leave you with just one note of caution. Beware the rhetoric during an election year. Check the facts before you grab your pitchfork and attack the bogeyman behind the gas pump.