Big Oil spends a lot of ad dollars.

And what is your small share of the blame for the misinformation out there, Dean? You and Paul Krugman.
You supposed economists tell us that supply/demand is responsible for price increases when you cannot demonstrate that from a chart.
The EIA, after reviewing their charts, has consistently forecasted steady crude prices over the last few years, and consistently been wrong.
There is ample evidence that excess speculation in oil futures markets is responsible for the price increases. Why do you deny it? Are you on the Goldman,Sachs payroll?

But a supply/demand analysis is actually consistent with a "don't bother, it's not worth it" conclusion. If you look at how much oil may be there and then at the amount of oil consumed, the total take is piffle. Taking every drop we could get from ANWAR would give us about two months of oil. We'd be much better off requiring that all vehicles except 18 wheelers meet stricter CAFE standards. (And we haven't even looked at the cost of major construction for what is not much oil.)

In fact, what's amazing to me is that people who allegedly are capitalists are so BAD at it. Although it may be that they expect the government to cover most of their costs. Then it might be worth it.

Ron,

Dean has already written about this. "There are sharp movements in oil and other commodities. These sharp movements are not just responses to changes in underlying supply demand. Inevitably speculation exaggerates these moves."

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=06&year=2008&base_name=mallabys_failed_effort_to_scar

Dean,

Stating that drilling is not expected to have any measurable impact on oil prices is almost a useless talking point without consistently and persistently stating why. Without knowing why drilling won't help, people have no ammunition to counter the Republican talking points.

We need to consistently and persistently point out that not all the oil drilled in the US is sold to the US. Instead, that oil is sold on the open market to the highest bidder. For example, some oil drilled in Alaska is sold to Japan. How does that help America?

We need to consistently and persistently point out that the oil companies have 68,000,000 acres of land already leased for oil drilling that they are not using.

We need to consistently and persistently point out that even if they started work today, that it would take about 10 years before that oil comes on the market.

And, this is a major point, we need to consistently and persistently point out that even when that oil does come on the market, there is no guarantee that OPEC won't stop manipulating the oil price. Just because we add a million barrels of production won't mean lower prices because OPEC could remove a million barrels to keep the prices up.

People need these rock-solid reasons to counter the nonsense Republican talking points.

Any semi-competent economist can see that the run-up in price has little to do with supply/demand.
I don't think Baker or Krugman or Paulson or Bodman are stupid.
So what's left?

Good point Ron. The implied answer (I think) is political BIAS.

Dean, your comments are correct only in so far as they go! But they don't go far enough.

Your argument seems to setup a false dichotomy between this-OR-that, rather than taking the more realistic approach of this-AND-that.

The article cited below by Pickens presents a comprehensive approach which, if resolutely promoted by government, will 'bridge' the United States to a state of complete foreign oil independence by 2050 ... while at the same time incorporating "green" resources, such as wind and solar AND "non-green" (oil) and "less green" (natural gas) resource along the way.

Perkins' plan is practical, sensible and economically sound. I hope it can be elevated to the level of a national debate; especially between the two (presumed)presidential candidates before the election. Neither of them have thus far set forth a carefuly-articulated plan like the one presented by Perkins in the video clip at his website.

http://www.pickensplan.com/

Hopefu[l],

Your wish has already partially come to pass. Check this out…

“Senate Homeland Security and Governmental Affairs Cmte. Hearing on Energy Security: An American Imperative; July 22, 2008 (Part 1 of 3)

“Washington, DC - T. Boone Pickens, Founder and Principal, BP Capital, L.P.; Gal Luft, Executive Director, Institute for the Analysis of Global Security; Geoffrey Anderson, President and Chief Executive Officer, Smart Growth America; Habib Dagher, Director, Advanced Structures and Composites Laboratory, University of Maine; Chaired by Senator Joe Lieberman (I-CT)

“The Committee hears testimony on improving the nation’s energy security by reducing the amount of oil used by the transportation sector, the role the government can play, and the effect reduced oil consumption would have on prices and pollution. The chief witness is T. Boone Pickens. Pickens testifies on his recently released plan to reduce the country’s dependence on foreign oil by an estimated 38 percent. Pickens" plan involves producing energy from wind in the Midwest and increasing the use of natural gas for transportation, allowing time for more alternative energy sources to be developed. The ‘Pickens Plan’ is estimated to cost an amount equivalent to what the U.S. spends on foreign oil in one year.”

http://video.energypolicytv.com/displaypage.php?vkey=c28781cbe5c47ef22c3e&from_search=1

I agree 'Hopefu' [sic].

Obama's energy 'strategy' is virtually non-existant. And McCain's 'plan' is half baked.

Finally, here is someone who makes sense while talking 'cents'.

There's too much at stake to allow our leaders to get by with banal, incoherent dribble that passes for a well-conceived, valid social policy.

The EIA charts for offshore production which are part of the report Dean refers to and which are available separately:

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html

look really bizarre to me - their predictions for offshore oil and gas production make sharp reversals from recent (pre-2005) downward trends. Trends were downward well before Katrina and despite significant price increases before 2005. Are there more recent data? This has little to do with the price effects of opening more areas for drilling - there is reason to doubt that there even would be drilling - but it makes me wonder how useful the EIA forecasts are in general.

While we're at it, Mr. Gore, according to Mr. Perkins -- and according to sound judgment as well -- gets the 'cart before the horse'.

First we must deal with the most urgent enemy -- foreign oil! Afterwards, we can, AND MUST, address viable long-term solutions for clean, renewable (so-called "green") energy for future generations.

Hysteria regarding the urgency of the latter -- no matter how well-intentioned -- is unhelpful, ill-logical and misdirected.

Chris V refers unquestioningly to OPEC's ability to manipulate oil prices. But if he'll look into the evidence, he'll find that the spare capacity on which OPEC pricing power was based has largely eroded. Their remaining power to manipulate prices consists almost entirely in the mantra "the market is well supplied" and unsupported claims about the size of their reserves (which many observers, including Dr. Sadad al-Husseini, formerly Aramco's top technical offical, argue are overstated by at least the 300 billion barrels creditable to the quota wars of the 1980s; even the then-Acting Secretary General of OPEC even admitted in October 2005 to the existence of "that sort of race to declare higher figures for reserves, driven by the anxiety about the quota system, which everybody knows.")

Anonymous is very perceptive in calling attention to the fact that EIA "predictions for offshore oil and gas production make sharp reversals from recent (pre-2005) downward trends. Trends were downward well before Katrina and despite significant price increases before 2005," which he or she describes as "bizzare."

Actually this is only the latest in a bizarre series. US lower-48 production has been declining continually since its peak in 1970, yet commonly official forecasts predict that beginning next year production rates will resume their upward trajectory. How unrealistic this expectation always has been is well illustrated by the record of the Reagan years, where every incentive was offered for increased drilling, with virtually no impact on the decline.

It would be most helpful to the cause of informing the public if Dean would occasionally mention in posts like the present one such basic facts about the production history and the EIA's bogus "forecasts."

Why would the gas companies (and their henchmen, the Republicans) claim drilling will lower the price of gas if they could not follow through on their offer? Are they just saying this now, and when they drill and we see nothing, they're just going to take it?

The only possible way that gas prices could be lowered is only if they are artificially high now. But they can't admit to that so they manufacture this lie that they don't have enough supply. Hey, that rhymes!

So anyway, what companies like Exxon SHOULD be doing is taking some of their record profit and investing in green technologies like geothermal energy. They can still dig in the ground all they want, and they won't hurt the environment.

At present, there is no energy plan in America.

In any case, here it is in plain English. If I knew how to connect you to it with a hot link, I would.

The importance of offshore drilling to Republicans is political - it allows them to say they have an energy plan (when they really don't), and it is an issue on which they can get some popular support. It is only an environmental concern if oil companies actually drill, which is much less than 100% certain. Oil companies can see the increasing expenses (also in the EIA report) and diminishing returns and may choose other strategies for maximizing profits; they are doing pretty well now without having done a lot of drilling recently in available offshore areas.

Obama's concession on this issue is politically astute and probably will not have the environmental impact that many people fear.

Isn't this whole thing totally overblown? Obama is just saying that, yes he knows offshore drilling, but that if he is asked to sign an energy bill that includes an expansion of offshore drilling he will do so. He just is saying he would rather spend political capital getting important things in than keeping offshore drilling out.

"Obama's concession on this issue is politically astute ..."

If by politically astute you mean politically safe, I agree.

Let's face it, Obama needs only appear to be against almost everything Bush is for and he is assured a victory in November. In the meantime, the elections is his to lose. Sooo unless he makes a major screw-up, he's in!! That's what politics with this high of a stake is really all about, when you're the heir-apparent for the presidency.

As to whether Obama's mysterious energy 'plan' is itself astute ... remains to be seen.

"In the meantime, the election is his to lose."

That's right. And McCain knows it too. So he's pulling out all stops in order to make even the smallest gaffe Obama makes -- like the 'race' thing -- seem gigantic. Believe me, you ain't seen nothing yet!!

In a few months the American people will tell us who they thought was the most politically astute: the one walking on eggshells or the one slinging the mud.

The Bush offshore drilling policy fits a consistent pattern:

Take a problem that Americans want solved (high gas prices).

Propose a policy with monetary rewards to political cronies (reward oil companies with lucrative deals) that has little or no effect on the problem that Americans want solved (high gas prices).

Collect campaign contributions from political cronies on promises to deliver more lucrative deals. Spend the campaign contributions on negative attack ads that claim that anyone not supporting the Bush policy (offshore drilling) does not care about the problem people want solved (high gas prices).

At the end of the Bush term, oil companies are making record profits (intended effect of Bush policies) and gas prices are high (not a Bush concern). After all, gas prices have to be high in order for Big Oil to make record profits. The profits come from the pockets of American consumers.

BTW- Since McCain switched his position to support offshore drilling, Big Oil has dropped close to $1 Million on the McCain/GOP campaign.

I used to be too cynical about government. Since Bush became president, I am not cynical enough.

Bakho displays a typical misconception of why the price of oil has suddenly gone vertical.

Of the 85 million barrels of oil being produced each day globally, the United States uses 25% of it while representing only 4% of the world's population ... and it has only 3% of its own reserves.

The United States imports nearly 70% of its oil from foreign countries, many of which are hostile to us and many who are extremely unstable. This situation must be reversed as quickly as possible.

The people in China don't think the price of oil is being driven by speculation or by American oil companies. They just know that it is the real global price for oil.

As you may know, the Saudis and Russians -- the number one and two producers of oil, respectively; both producing about 9 million barrels a day -- have met to discuss what they can do to (ahem) stabilize the price of oil. Do you really believe that's what they talked about?! I don't think so. The bottom line is ... the people who have the oil are going to try to get the best price they can for it. Period. End of sentence.

Ask the average American citizen what he or she thinks is going on with energy and they will tell you that whatever it is, it's bad. And, they will tell you the government isn't telling us the truth about what's going on.

What's needed is not the kind of back and forth placing of blame I see happening on this blog. The leadership of this country needs to understand the problems and recommend viable solutions to our energy crisis, articulate them effectively to the American public, and promptly remove the obstacles (whatever they are) standing in the way of achieving these goals.

Desperate situations require desperate measures. Let the national debates begin ... before we find ourselves in a much deeper and expensive hole.

TRUTH- I said absolutely nothing about why the price of oil has suddenly gone vertical.

We know how to solve the problem. Jimmy Carter proved that fuel efficiency standards and alternative fuels could decrease oil demand drastically (US oil demand dropped 20% between 1978 and 1983). Jimmy Carter was trashed by Big Oil and his policies continue to be trashed today because US oil demand did not recover to 1978 levels until 2000. Bush won't work to reduce demand because Big Oil would lose money. Bush represents Big Oil and other special interests (his base), not the American people.

If drilling offshore would bring down gas prices (it won't) and the high gas prices could be predicted based on demand (they were), why didn't Bush and the Republican Congress approve offshore drilling when they controlled Congress? Were they waiting for the right political opportunity? Did they engineer high gas prices to help create that opportunity? You bet they did unless you believe they are incompetent.

Why have Bush and the Republicans blocked Kyoto, and blocked everything to do with fuel efficiency and oil alternatives? Because Big Oil pays them to block policies that would reduce oil demand and lose money for Big Oil just like they paid the McCain campaign after he switched from opposing offshore drilling to promoting it.

Bush and company have done everything possible to insure a high demand for oil which has led to record profits for their Big Oil cronies.

The American people look at Bush policies and think Bush has failed to reduce oil demand and move to less dependence on oil.
Bush looks at his policies and thinks he has succeeded in delivering record profits for his Big Oil cronies.
Bush runs an administration with policies of, by and for Big Oil and other special interests. This is why we have a problem today and why Bush is still proposing non-solutions.

If the Republican off-shore drilling proposal were to pass, I think Big Oil would see to it that gas prices quickly went down markedly. It has little to do with the economic arguments folks have been making ... Big Oil can afford it to give up SOME of their exhorbitant profits NOW, in hopes of getting enough political allies elected to assure greater FUTURE profits. Do you think many American voters will bother to see it as a loss-leader?

Ad hominem arguments will not serve to promote a serious public debate about a national energy policy.

"Ad hominem arguments will not serve to promote a serious public debate about a national energy policy."

Name 1 Bush policy that he has bothered to entertain a serious discussion with Congress or the American people instead of villifying alternative views.

Bush has spent the last 7 1/2 years making ad hominem arguments about energy from FERC to Enron to Iraq oil will pay for the war to "offshore drilling-if you are against it you are for high gas prices".

So the EIA thinks there is only 18 BB in the undrillable OCS (in 2003):

However the DOI MMS says there are 39 BB in the undrillable (non-Gulf of Mexico) OCS (in 2006):

http://www.mms.gov/revaldiv/PDFs/2006NationalAssessmentBrochure.pdf

With most being in the Alaska OCS (26 BB).

However the truth is that the undrillable OCS has not been explored well for years because it was not drillable, so the actual amount there could be much less or much more.

There are probably 8BB in ANWR as well, perhaps as much as 16BB.

What is more important is that American drilled oil is much less "risky" than any other source. The risk premium that comes on middle east or Nigerian oil would not apply to US oil. Thus not only would US oil add to supply, it would add non-risky supply.

I wouldn't take a bet on future oil prices under any scenario because we don't know. The economic thing to do is a cost/benefit analysis, recognizing that the US would see siginificant tax gain (probably billions of dollar annually) from significant OCS production at almost any price, especially a high one. In addition to an increase in overall GDP and economy from additional production.

The risk is spills, but we should analyze what the real risk is, looking at Norway's production, for example.

Econotarian,

We do know what the effect our marginal increase in drilling will have: none.

That is because:
A. We sell our oil on the open market. For example, oil drilled in Alaska is sent to Japan.
B. We will not produce enough to bring us off foreign oil. So, we will still be beholden to the market price of oil, currently controlled by OPEC. If we bring 1 million bpd online, they take 1 million bpd offline, leaving prices exactly where they are. That won't hurt them at all, they'll still make a mint.

Anyone care to comment on Obama's energy speech in Michigan today?

Natural gas is the key to bridging to a foreign-oil free America, according to T. Boone Pickens -- quoted by Obama in his energy speech yesterday.

Natural gas is the key to bridging to a foreign-oil free America, according to T. Boone Pickens -- quoted by Obama in his energy speech yesterday...

See the Pickens Plana.

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