Published: July 08, 2008 12:25 pm            

Letter to the Editor July 8, 2008

Dear Editor:

Dennis Heath (letters — June 24) makes a reasonable argument for offshore and ANWR drilling, but I respectfully disagree with him.

First, supply and demand is clearly sound economic theory, but it does not dictate that more pumping equals more supply and thus lower prices. That position ignores some important facts. For example, while we use more than 20% of world oil production, our lands include only 2% of remaining oil reserves. Given global market forces -- e.g., increasing Chinese and Italian demand -- what impact would that 2% have on prices? Even conceding that we might someday see a modest per gallon savings (nickel or quarter?), how long would such savings last? And when the next crisis hits, what then?

Second, market forces are far more complex than “more pumping=lower price.” Much of our reserves are only feasibly accessed because of current high prices. Look locally at the Woodford Shale for an example. We didn’t just discover those gas reserves; we’ve long known about them, but they’ve been too expensive to access. Now that prices are up, we can economically go for it. High production costs will of course be a component of future pricing (i.e., higher prices), but the calculation is that the higher-priced market will bear the burden. Is that consumer relief?

Third, while supply-and-demand is clearly a factor in the current pricing crisis, it’s not the only one, as Heath notes in passing. Our weak dollar (a result of our President’s economic policies) has caused speculation that, in turn, has contributed to what may be the sort of market “bubble” that has so disrupted the housing market -- e.g., artificial price inflation that is driven not by supply-and-demand forces buy by the collective force of individual commodity futures investment decisions. The oil debate is finally starting to look at this factor (notably, AEN editorializes today against such circumspection), but unfortunately, the topic is dense and arcane and not as elegantly sexy as “Let’s drill!”

Fourth, again with respect to supply-and-demand, we seem to be ignoring Katrina’s and Rita’s disruption to our Gulf production and refining infrastructure. We also seem to be disregarding the international market disruption caused by the Iraq war. Given those factors -- among others -- it strikes me as disingenuous to rely on the partisan (and inaccurate!) slogan frequently invoked lately -- that prices are high because Democrats and environmentalist won’t let us pump. That cliched slogan ignores that we do not control the market and, more fundamentally, are living beyond our energy means.

The underlying debate in the gas price fiasco is: What are we doing to make America strong long into the future? Sitting on only 2% of the world’s remaining oil reserves puts us in a pretty precarious position to not take seriously the need for sensible and broadbased planning. Unfortunately, it is an election year (not a time known for sound policy proposals!), and we should avoid knee-jerk harmonizing with the inescapably cynical and partisan gamesmanship of the season. But having said that, if we are going to view this through a partisan lens, GOP leadership -- marked by vehement opposition to increase auto fuel efficiency or a meaningfully diversified energy resource portfolio -- has not blazed any trail toward a more sustainable energy future.

The debate is healthy, but it must be fact-based. And to my mind, the facts indicate we cannot simply drill ourselves to a stable and secure energy future. To quote our President: We are addicted to oil. He’s right, and my hope is that we collectively take a breath and think through and past the “next” step. While increased pumping may be part of the plan, it is no panacea. We need to get on a course not just toward our next “fix” but toward fixing the underlying problem -- that is, our insatiable and near-exclusive thirst for an ever more expensive and dwindling resource.

Stephen Greetham, Ada

        

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