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FYI:
http://www.huffingtonpost.com/2008/06/23/impossible-finding-expert_n_108692.html
Impossible: Finding An Expert Who Says McCain's Energy Plan Provides
Short-Term Relief<http://www.huffingtonpost.com/2008/06/23/impossible-finding-expert_n_108692.html>
Last week, Sen. John McCain reversed his longstanding opposition to offshore
drilling. The Arizona Senator and his campaign surrogates framed the move as
a much-needed effort to combat energy costs in the wake of record high gas
prices - political action to Sen. Barack Obama's inaction.
"Floridians are suffering, and when you're paying over $4 a gallon for gas,
you have to wonder whether there might be additional resources that we might
be able to utilize to bring that price down," said Florida Gov. Charlie
Crist, who also changed his stance on the policy.
But is there one credible economist or energy analyst who actually believes
that offshore drilling could have a short-term impact on the market
dynamics?
The Huffington Post took on the task of finding an expert who thought that
Americans would, within the next decade, receive relief at the pump from
McCain's plan. Querying the entire scope of the ideological spectrum -- and
putting aside the debate over whether or not offshore drilling was sensible
policy -- the consensus seemed to be that if the presumptive GOP nominee was
persuading voters that he could help decrease their gas bill, he was either
living in a political fantasy or being disingenuous.
We started out with the conservative crowd, the one seemingly most
predisposed to the idea of drilling.
"There is no question it would take quiet a bit of time for this to come to
the market," said Max Schultz, an energy analyst for the Manhattan
Institute. "But it was the same argument that was used any time over the
past ten years, that it would take too much time for this stuff to have an
affect... Having a couple million extra barrels on the world market would
eventually help ease those markets."
Other expressed similar, qualified skepticism about the short-term benefits
of McCain's plan.
"Would starting to drill now do anything for consumers in the near future?"
asked Ken Green, an energy analyst with the American Enterprise Institute.
"The answer to this one, again in my opinion, is probably not, since it'll
take so long for new oil or gas to come to market. There is some small
chance it would have immediate benefits if the current price of oil is
fueled by spectators convinced that supply will continue to remain stagnant
in the face of growth. They could take a commitment to drill as evidence
that supply constraints will loosen, resulting in lower prices (or slower
increases), making oil futures a weaker investment that would trade for
less."
Added Jerry Taylor, a fellow at the Cato Institute, "I think it would have
an effect, just not a major effect. The odds are you couldn't get any
significant amounts of crude from coastal areas within the next decade.
Offshore rigs, if you want to go get one, tough luck. They are all leased
out. Even if the infrastructure is there, it would be hard, but the
infrastructure isn't there... But markets react to future developments and
even if the crude is not flowing, the project itself could have an impact on
markets."
But the assertion that offshore drilling could have an impact on oil prices
by placating oil speculators is itself a contested proposition. And some
analysts insist that it is wishful thinking that the market would suddenly
perk up because of the prospect of more supply.
"There are a number of problems with that argument," said Rob Shapiro,
formerly undersecretary of commerce under President Clinton, and co-founder
and chairman of Sonecon, LLC. "First of all I don't think anyone thinks that
within the time period of futures trading, that there would be enough
additional supply to effect global future prices. Second of all, the market
will look at this not only in terms of, 'there is more supply,' but also,
'there is more supply at substantial greater costs to recover than current
supply, and with substantial new liabilities' -- the communities that are
going to sue them when they destroy their beaches."
Indeed, as Taylor pointed out and as a number of independent studies have
emphasized, there are a host of loopholes, costs, delays and uncertainties
that make offshore drilling far from a sure oil market boom. There is a
five-year waiting period just to lease land for drilling, and even more time
on top of that to get a contract for the oil rigs. The American Petroleum
Institute recently acknowledged that there is a dearth of equipment to drill
on the land and coasts that are already accessible. And depending on the
size of the station being built, and the possibility that oil may not be
found immediately, it could be upwards of ten years before crude is even
brought to the surface.
The Energy Information Administration estimated that oil from these sites
would hit the market around 2017 and peak around 2027. Rushing the process
would likely only result in less supply. "The faster we try to drain the
less efficient the drainage," said Dr. Ralph Byrns, Professor of Economics
at UNC-Chapel Hill. "If we drain it dry and still get 14 billion barrels of
oil [the President has suggested 18 billion], that itself would still take
20 years."
Which brings us to the other side of the ideological spectrum, where
analysts and experts not only see offshore drilling as a relatively
fruitless enterprise, but precisely the wrong type of solution to achieve
energy independence.
"Oil companies make more money on oil they own as long as the price stays
high," said Marc Cooper, Director of Research for the Consumer Federation of
America. "So the primary effect of drilling offshore will be increasing the
profit of the oil companies. Today when they make a deal to drill in Saudi
Arabia, they deal with the local government who takes all the rent. When
they own their own oil, when they go to the outer-continental shelf, they
don't have to pay OPEC."
A Democratic analyst, who spoke on the condition of anonymity, had a more
nefarious explanation for McCain and President Bush's support for the
offshore exploration: "If you wanted to go into Iraq, you saw 9/11 as a way
to do that. And if you want to do offshore drilling, you see $4.00 a gallon
gas as a way to do that."
To be fair, McCain and his aides have publicly stated that in this battle,
as well during his press for a temporary gas tax holiday, the Senator was
not casting his lot with the economists. And in a moment of sincerity, a
senior adviser to the Arizona Republican, Douglas Holtz-Eakin, acknowledged
that new offshore drilling wouldn't have an immediate effect on gas prices.
In fact, three weeks
before<http://www.huffingtonpost.com/2008/06/18/mccains-offshore-drilling_n_107872.html>he
came out in support of drilling, the Senator himself acknowledged that
offshore resources "would take years to develop."
And yet McCain has been arguing that he is taking proactive steps to relieve
the burden consumers are feeling at the pump, even declaring that offshore
drilling "would be very helpful in the short term in resolving our energy
crisis." It is, some say, the antithesis of straight-talk politics.
"Obviously McCain's people know this is kind of a joke," said Dean Baker,
co-director of the Center for Economic and Policy Research. "But they have
the media frame that they want. They have Obama sitting there whining about
the environment and he is there doing something about five-dollar gas, when
in essence there is nothing his plan does for short term relief."
*Bolu Adeyeye was a contributing reporter to this story.*
--
Nico Pitney
The Huffington Post
P: 202.834.0301
AIM: njpitney
GTalk/MSN: [email protected]
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