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May 01 2012

18:54

House Republicans’ Energy Policy Delusions


House Republicans have been lambasting President Obama, asserting that it’s the president’s “all of the above” energy policy for rising gasoline and fuel prices. Nothing could be further from the truth, as the Obama administration has pointed out that US oil and gas production has actually increased during his first term. Apparently, House Republicans don’t know the basics when it comes to how prices are set in a global oil market, or the dynamics and mechanics of oil exploration and production in the 21st century.

Interior Secretary Ken Salazar recently went so far as to say that House Republicans “are deluded if they believe expanded oil and gas drilling will bring lower gas prices or energy independence,” E&E News reported April 24.

How Oil Prices are Determined

The price of a barrel of crude oil published and touted in news and media is set at the margin, what sellers and buyers are willing to pay for the next barrel of oil. It’s a global market, with whatever number of barrels of oil not already contracted for delivery as per longer term contracts being shipped to the highest bidder.

So if crude, or its derivatives, are in relatively short supply in Europe, as has been the case of late, it’s European demand that will effectively set the price of oil globally. Demand for gasoline has actually been decreasing in the US. On top of that, oil in storage has been on the increase. It’s emerging economies like China, India and Brazil where demand for oil is growing. And that’s expected to be the case for decades to come.

Oil traders will buy oil in the US, driving up the price, and arrange to ship it to Europe, or other markets where prices are higher, as long as the price difference makes it profitable to do so. That will occur until the price differences are so small that all, or just about all, the profit is squeezed out.

“Drill, Baby, Drill” is More Than Irresponsible Leadership, It Doesn’t Work

Adding to House Republicans’ delusion is the assertion that we can drill our way out of rising oil prices, again showing how poor is their apparent understanding of the workings of oil and gas exploration and production. Oil and gas exploration is akin to hitting in baseball. If you get a hit one in three times, you’re all but assured a place in the Hall of Fame. The hit-to-miss ratio may be higher in oil and gas exploration, but not by much.

It’s true that US oil production is now on the rise, but that’s due to the growing amount of unconventional oil that’s being produced from sites like the Canadian oil sands in Alberta. That oil is a lot more expensive to extract, and it takes a much greater toll on the environment.

The same can be said, in terms of financial and environmental costs when it comes to offshore oil exploration. Large oil strikes have become increasingly rare, which is driving oil majors to go farther offshore and into harsher, more fragile and shrinking relatively pristine natural environments, such as the Arctic.

Then, of course, finding oil won’t do a thing to alleviate a supply shortage now or for a number of years down the line. It takes years to develop an oilfield once an economic one is found, and doing so comes with numerous and varied risks that could abort the attempt at any time.

Trying to “Get Real” on Energy

Interior Secretary said as much while speaking at the National Press Club in Washington, D.C. last week. “Americans want to cut our reliance on imported oil,” Salazar stated. “They know that a lot of factors affect gas prices, including world markets and international events, and that unfortunately there is simply no silver bullet in the near term.”

Further cutting into House Republicans’ distorted assertions, he added, “It is a place where up is seen as down, where left is seen as right, where oil shale seems to be mistaken every day in the House of Representatives for shale oil, where record profits justify billions of dollars in subsidies,” E&E’s article quoted Salazar, a former Democratic senator from Colorado. “The good news is the imagined energy world is actually very small,” he said. “I think you can actually find its edge, the end of it, when you walk out of the House of Representatives.”

In contrast to House Republicans’ plans to hand over national energy to the oil and gas industry, Salazar urged Congress “to pass measures to codify the reorganization of the former Minerals Management Service and safety reforms implemented following the Deepwater Horizon oil spill. He said Congress should also move to extend renewable energy tax credits and a clean energy standard as proposed by the president,” according to E&E’s report.

He also noted that Congress could easily pass ratify a transboundary agreement with Mexico the Interior Dept. concluded in February that would provide access to as much as 172 million barrels of oil and 304 billion cubic feet of natural gas in the central Gulf of Mexico.

“I want to be realistic about what we can expect from this House of Representatives, but I do believe there are some things they can work on, some low-hanging fruit that could and should be passed this year,” he was quoted as saying.

A transcript of the Interior Secretary’s prepared remarks are available at the DOI’s website.

*Photo courtesy: Dept. of Interior

March 07 2012

22:55

What Makes Gasoline Prices Go Up?

Cognitive dissonance persists on the presidential campaign trail and in Congress, but some energy statistics are telling.

January 30 2012

23:23

Weighing Tariffs on Chinese Solar Panels

A preliminary finding by the Commerce Department suggests that if penalties are levied, they could be retroactive.
21:04

January 27 2012

12:55

Is Spent Nuclear Fuel Really Waste?

A special commission on nuclear waste is not bullish on the near-term prospects for reprocessing it so that the uranium and plutonium it contains can be reused..

January 19 2012

20:47

State Department Readies an R.S.V.P.

House Republicans want Secretary of State Hillary Clinton to testify before a subcommittee on a decision to forgo a permit for the Keystone XL pipeline. Aides say she will probably send a top expert.

January 18 2012

18:39

State Department Opposes Quick Action on Keystone XL

The State Department is expected to say that routing, environmental and safety concerns raised by the pipeline project are too complex to be decided by the deadline set by Congress.

January 17 2012

19:53

January 13 2012

20:51

January 12 2012

20:20

On Our Radar: A Fracking Confrontation in Ohio

Residents of Youngstown express disappointment after state officials decline to link 11 earthquakes to fracking for a deep-injection gas well.

January 10 2012

01:48

Oil Sands Foes Are Foes of Canada, Minister Says

Denouncing opponents of the Keystone XL project, Canada's environment minister says they are financed from abroad.

January 04 2012

20:55

And Now, the Oil Industry Caucus

The president of the American Petroleum Institute said the United States would achieve diesel and gasoline independence if the government stopped interfering with industry goals.

December 29 2011

21:13

On Our Radar: Scientists Appeal to G.O.P. Candidates

"Ignoring the issue of climate change places our health, our quality of life, our economic vitality, and our children's future at risk," scientists say in a statement.

December 20 2011

21:09

New York Plans Greener Zoning Rules

A proposal from the Bloomberg administration and City Council would make it easier for property owners to add insulation to exterior walls, for example, and install awnings, skylights, green roofs, solar panels and greenhouses.

December 19 2011

18:11

A Uranium Project in the Political Cross Hairs

The House speaker wants President Obama to make good on a campaign pledge to aid a uranium initiative in Ohio but stops short of backing an earmark for that purpose.
12:26

December 14 2011

16:04

Report Seeks Far Tighter Safety System for Oil Drilling

A panel investigating the 2010 gulf oil spill says that safety had not been a focus of the oil industry or its regulators, a problem that became more grave over the years as the complexity of offshore drilling deepened.
12:52

Inevitable, or in Limbo? A Dam for the Mekong

Still absent is a clear commitment from Laos to halt all construction activity related to the proposed dam, which conservationists view as a major environmental threat.

December 09 2011

16:25

Reining In the 'Soft Costs' of Solar

Estimating that 40 to 50 percent of the cost of owning and operating a rooftop solar power system is administrative expenses, the Department of Energy organized a competition to find the best ways of bringing those costs down.

December 04 2011

15:01

To the Battlements, Mark Ruffalo

Next stop on his protest agenda: Dimock, Pa., where the controversial natural gas drilling process known as fracking is already under way.
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