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Tuesday, June 24, 2008
Rhetorical gimmicks no substitute for oil exploration
The Atlanta Journal-Constitution
Tough call.
Do we go with Indigo Girl Amy Ray on nuclear energy? Or do we go with the thoughtful, wise and deliberate Johnny Isakson? Close call. Really tough. A lot of good policy truth comes out of the entertainment industry.
Her view is that “nuclear power is not the answer to our energy dilemmas.” His is that “Democrats must be willing to embrace nuclear energy for electricity and responsible exploration of our oil and gas resources in Alaska, Colorado, Montana and North Dakota, as well as in the Gulf of Mexico and off the Atlantic coast.” Republicans, in return, “must be willing to embrace conservation initiatives as well as alternatives such as solar and wind energy.”
Hmmm. I’ll take Sen. Isakson’s position. Besides, neither he nor anybody else in a responsible position has suggested that nuclear power is “the answer” to our energy insufficiency. On virtually nothing is one approach “the” solution to a problem, or the cause of it.
To Barack Obama, there are at least two causes of $4 gas. One is Big Oil’s profits, which he’d tax away. The other is speculation in oil markets, which he’d regulate more heavily. In the Obama world, more taxes and more regulation are the combination of solutions to most every problem that can’t be solved by more spending.
U.S. Sen. Saxby Chambliss, at a Senate hearing last week, noted that in futures contracts for the benchmark West Texas Intermediate Crude Oil, the evidence does not confirm that speculation has been a major contributor to the run-up in prices. “The data shows that while there may have been an increase in market participation overall,” Chambliss said of oil futures in domestic trading, “the proportion of positions held by commercial participants … and noncommercial … has not changed over the past two years. Speculation … seems to have held steady at about 20 percent.”
Commercial participants are those like MARTA that attempt to lock in future gasoline costs and fully intend to take delivery. Noncommercial represents speculation.
The precise role of speculation worldwide is not yet known, but there is a danger here that politicians, like Obama, can make matters considerably worse. “There is speculation in all commodity markets, just as there is in the stock market,” said Chambliss. Any exchange in any country can list oil contracts for trading without any approval from the U.S. Commodity Futures Trading Commission. It may be physically delivered here, but it can be traded anywhere.
A knee-jerk reaction on the part of politicians can’t stop worldwide speculation, if indeed it’s a problem, but it can drive trading markets overseas, as has been done with the so-called IPOs, or initial public offerings of companies. Most of those are now going to England and elsewhere, he said.
The rhetorical gimmicks —- taxing Big Oil, closing what Obama calls the “Enron loophole” that exempts some electronic trading from U.S. regulation, or nationalizing the oil companies —- are campaign fodder. They’re distractions, not substitutes for exploration, for adding refinery capacity and for nuclear. Even John McCain’s proposal to give a $300 million taxpayer-funded “prize,” amounting to $1 for every man, woman and child in the country, to the inventor of an auto battery that will deliver power at 30 percent of the current cost is a desperation gimmick from a politician who wants to be seen as offering a solution.
McCain, like Obama, opposes drilling on a small portion of the 19 million-acre Arctic National Wildlife Refuge. McCain has come to recognize the essential importance of exploration on the outer continental shelf; Obama is in la-la lockdown, still dreaming. Some 97 percent of the 2 billion acres of the OCS, which contains an estimated 86 billion barrels of oil, is currently off-limits to exploration. The U.S consumes about 7.5 billion barrels of oil per year.
U.S. Rep. Lynn Westmoreland of Grantville, a Republican, has gathered the signatures of 174 of his colleagues on a pledge. It reads: “I will vote to increase U.S. oil production to lower gas prices for Americans.” That’s it. Simple. But it gets to the heart of the problem. “Supplying our energy needs requires ‘all of the above’,” said Westmoreland. That includes “conservation, alternative energy development and increased supply of oil,” he said.
There’s not one solution. But there’s no solution without more exploration. Open ANWR and the outer continental shelf.
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