Oil & Gasoline: The Politics

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oil rig photo - courtesy National GeographicThere is a factual story to be told about the multi-million dollar war being waged between the Oil and Gas and Republican team on the one side, and the Democrats, consumer, and environmental groups on the other. The factual story however, leaves much room for guesswork as to why the facts are as they are. Let's examine this story as logically as possible.

Folks don't want oil derricks in on their front lawns, town squares, or Central Park. Hence, laws were passed ages ago regulating where mining and drilling operations may take place, to protect towns, farmlands, and even waterways, all necessary to American life.

The cost to the oil industry to buy up private properties where oil might sit, is a very expensive proposition. Oil companies seek oil deposits in the least expensive places possible to drill. Those places happen to be on Federal lands, bought and paid for by taxpayers, otherwise called the Public, and offshore.

Therefore, the Oil based corporations seek control of the reins of government power to avail themselves and shareholders of the least cost and maximum profit potential as possible, both now and into the distant future. These oil corporations are spending millions on TV advertising promoting an image of responsible management of America's energy needs, as environmentally friendly investors in the future, and in lobbying efforts seeking the authority to drill wherever and whenever it will be most profitable.

The Republicans are tied to these oil corporation efforts by campaign contributions, and more importantly, by their supporter's major investments in oil stocks and corporations. Democrats are being lobbied by the oil corporations as well, but view themselves as the champions of the environment and alternative non-polluting energy sources, which a majority of Americans also sanction. And here lies the field of battle between the Democrats, Environmentalists, and Coastal local governments on the one side, and Republicans, oil corporations and their shareholders on the other.

10's of billions in tax payer dollars are the prize being fought for on the U.S. Congress floor. Democrats want to subsidize alternative energy source innovation and production and foster independence from foreign oil which will require a long term commitment to that goal. Republicans want the oil companies to have nearly unrestricted access to oil deposits anywhere and anytime they discover them even though, this would reduce dependence upon imported oil very little as our domestic demand will increase as domestic supplies are increased. However, more native oil supplies would mean more profits for American oil corporations into the future.

It is a fact that the U.S. government has issued vast leases for oil drilling on land and offshore which the oil corporations have sat on without drilling them. There are 1 million square acres of Gulf Of Mexico oil leases purchased by oil corporations which remain untapped. Which begs the question, why are oil corporations fighting for oil rights on the East and West Coast continental shelves and the Arctic National Wildlife Refuge (ANWR) when they have leases for vast areas of federal lands and offshore sites which they have not begun to drill?

It is a question no one in government or the media seems to want to ask, nor are capable of answering with certainty and evidence. Which leaves the answer open to speculation. But, there is an obvious answer. This little known fact of sitting on, and not drilling, available oil field leases has the effect of lowering oil supply of domestic oil. Which in turn creates both higher profits on current oil tapped as well as, and this is important, the illusion that there is an emergency situation regarding shortage of oil the Republicans and oil corporations can use to argue their need to get leases for areas previously denied them.

They want it all. The very heart and soul of the oil industry is an unfettered and unlimited access to all suspected deposits of oil reserves. If alternative sources of energy are found to replace oil, the oil corporations are out of the oil business, which has been an extremely profitable business to be in. It is therefore, crucial to the oil corporations to secure leases on all potential oil reserves BEFORE such alternative energy sources are developed. Once alternative energy sources and technologies are developed and marketed to the point of being cost competitive with oil based energy, the oil industry will immediately become less profitable as it competes with alternatives for a lower price.

The oil industry with record profits today, can afford to fight this battle on the airwaves and in the Congress to secure access to all of America's oil reserves. Once alternatives to oil energy are marketable, their profits will reduce, and the costs of fighting these battles with environmentalists and Democrats will become less affordable. Therefore, it is in their interest to promote the false image of oil shortages and emergency need to secure access to all oil reserves everywhere, despite the fact that millions of acres untapped leases to drill are already available to the oil corporations.

This "crisis" is their means of swaying both the public and the Congress to grant rights to drill on the East and West Coasts and ANWR, while they can afford to wage that public perception war. There are many issues being fought over, federalism and state's rights to preserve the aesthetics and tourism industries for their coast lines, for example, and taxation of oil corporations while they are reaping historical records in profits. But, the core and central issue is whether oil will remain the mainstay of energy and product development for the rest of this century, or not.

In other words, this is a battle between the oil industry of the 20th century, and alternative energy industries present and future of the 21st century. This is a transition point in history. There is every indication that if sufficient investments are made today in alternative energies and non-oil based technologies, that America could become extremely oil independent, not just independent of foreign oil imports, over the next 25 years. That would spell an unprecedented decline in the oil industry and severe contraction in their profitability margins throughout the rest of this century and beyond.

The oil industry and Republicans view the Democrat's proposal to increase taxes on oil corporations and invest those revenues in the demise of the oil industry by fostering research and development of alternative energies and technologies as unconscionable. The Democrat's and Environmentalist's view as unconscionable the Oil industry's sitting on thousands of untapped oil drilling leases, all the while crying oil shortage.

You will hear Republicans say drilling in ANWR will reduce our oil dependence. This will be true, 10 years from now, and perhaps for no more than a couple years. You will hear Democrats say taxing oil corporations and funding energy alternatives with those taxes will reduce our dependence on foreign oil. This may be true in from 5 to 20 years from now, depending on how quickly alternatives can be perfected and marketed. The bottom line is, higher oil prices are hear to stay until competitive alternatives are put in place. Oil may drop as low as $80 to $100 per barrel in the future for a short period. That drop however, will only be part of a 2 steps higher one step lower trend in oil prices, until there is an available competitively priced alternative energy source for oil.

Gasoline is a matter of refinery capacity. There is no oil shortage in the world. We know this because not a single oil tanker anywhere in the world has pulled up to a port to fill up and been turned away empty or less than full. In America, there is an oil refinery capacity problem which creates seasonal and regional gasoline shortages. As these shortages occur more frequently, the price of gasoline spikes higher. And because they are occurring more frequently, the price dips don't dip as low as the previous one. This creates a trend of ever higher gasoline prices overall.

There is also the speculative pressure on gasoline prices. If the Democrats and environmentalists and alternative energy technology start-ups win their battle against the oil industry and Republicans, there will be no need for newer oil refineries. This makes the investment in new oil refineries a very risky one, until the outcome of the war over oil is determined.

It is crucial for the future of America that voters and the public bear this discussion in mind going forward. It is after all, their, and our children's future and pocketbooks which are hanging in the balance. It is the environmental quality of our nation and earth also hanging in the balance.

Some excellent article sources for the political battles being waged over this issue are:

Billions could be lost in Gulf oil leases.

Happy Earth Day, How About An Oil Lease?

Democrats take jab at holders of unused oil leases.

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This page contains a single entry by David R. Remer published on June 18, 2008 4:33 PM.

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