Hot Air Over Gas Prices And Oil Supply

I've been covering the energy issue in drips 'n' drabs ever since drilling in the Arctic National Wildlife Refuge returned as a hot political issue. Considering the current furor over high gas prices, a more comprehensive look at key aspects of the matter is called for.
High Profits, or High Taxes?

An issue as emotional as rising gas prices is tailor made for demagogues more interested in scoring political points than working towards practical solutions. And few better illustrations of that demagoguery can be found than the interview Neil Cavuto (Fox News, of course) had with Senator Dick Durbin, (D-IL), the video is here, the transcript here.

Cavuto continually asked Senator Durbin about high gas taxes, while the Senator bluntly ignored those questions and continued to read off talking points about the profits that oil companies were making. Finally in frustration, Cavuto asks " So, $0.50 cents a gallon, the taxes are OK? The 9 cent profit, that's not OK?"

The chart above from The Tax Foundation, based on Bureau of Economic Analysis, U.S. Energy Information Administration data shows who is really doing the gouging here. Oil industry profits go up and down with market conditions. Taxes only go up.

Oil Company Shareholders: Paying More Than Their Share of Taxes

In a January 2006 piece entitled "Large Oil Industry Tax Payments Undercut Case for Windfall Profits Tax" The Tax Foundation averaged the amount of taxes paid from the big three oil companies, ConocoPhillips, Chevron and Exxon Mobil per share of stock and compared it to the amount of taxes paid for each share's earnings. The result: where an average share paid $6.59 in earnings, it also paid $4.58 in taxes. Furthermore, for each worker employed by these companies, the company paid $249,336 in taxes.

To say that corporations which pay an effective tax rate of 41% are not paying enough is laughable.

United States Geologic Service National Oil and Gas Assessment Update 2005

(click here for larger image)

U.S. Oil Resources Sufficient to Meet Future Needs, If We Drill NOW!

The 2005 update to the USGS National Oil and Gas Assessment showed a 50% increase over the 1995 study in economically feasible and technically recoverable crude oil resources. New technology is allowing us to uncover previously unknown resources in both current oil production fields and untapped reserves.

Current available resources easily exceed the 112 billion barrels of oil (that's BILLION) that the 1995 study (page 2) described as recoverable in the United States. That's an amount that could, without any imports, fuel our nation for more than a decade as we transition towards an economy based on alternative sources of energy.

Yet, over the same time period domestic oil production dropped while imports and demand, along with prices, increased (see Energy Information Administration Annual U.S. Supply and Demand chart).

Arctic National Wildlife Refuge: The Phony Debate

Opponents of further petroleum development chortle that it would take ten years to bring to market any new oil and gas resources from remote places such as the Arctic National Wildlife Refuge. It will take time to develop the infrastructure to safely exploit those resources. Both houses of Congress passed a bill to allow safe drilling in ANWR in 1996 and it was vetoed by President Clinton. Had Clinton not vetoed the bill, ANWR oil would be available NOW!

Opponents of ANWR also spread the disinformation that the exploitable resources at ANWR aren't enough to bother about. Yet every survey from the US Geologic Service suggests otherwise. Had ANWR been producing at the time Hurricane Katrina knocked out oil production in the Gulf of Mexico, ANWR would have replaced the entire amount, lost because of the storm, lessening the gas price shock of last fall.

full size image here.

As the Energy Administration analysis in the chart above shows, production from limited development at ANWR would be enough to prevent even further slippage in domestic crude oil production, which would still be woefully short of the 20 million barrels we use per day.

And, as we have already seen in previous USGS studies, the amount of actually recoverable oil from US deposits has increased dramatically over previous estimates. It's much more likely that the amount available would be closer to or exceed the upper bounds of these projections.

Safety or Socialism the Prime Motivator for Oil Opponents?

Environmental concerns are often cited as the moral imperative among reasons not to drill in ANWR. Yet, development at the nearby Prudhoe Bay oil fields using older, less safe technology hasn't resulted in environmental devastation. Even a much hyped "massive spill" in a pipeline leak in March turned out to be little more than a puddle, which you can see in this BBC report.

And let's not forget Hurricane Katrina which knocked out all those oil rigs in the Gulf of Mexico last year. Where were the scream headlines of environmental devastation, and photos of oil soaked beaches? Mainstream media coverup? Sure!

The caribou, ah the skittish caribou! They seem to be doing just fine adapting to the sight of oil production facilities (larger photo here) which would be substantially less physically and visually obtrusive in the even smaller area of development under discussion these many years at ANWR.

Environmental scaremongering has always been the socialist's best tool for advancing their true agenda, which is placing limitations on the economic growth and freedom of the United States.

Left Funds Destruction of Amazon Rainforest with Boycott of Exxon

If you think the description of the left's environmental agenda as described above is absurd, consider this:

In response to news reports that retiring Exxon Mobile Chairman, Lee Raymond, received a $400 million dollar retirement present, progressives began promoting a boycott of Exxon products and a BUYcott suggesting that fellow leftists buy CITGO gas instead.

CITGO is of a state owned enterprise under the sole control of Venezuelan dictator Hugo Chavez, whos is dubbed by progressives as the "Anti-Bush." It's suggested that leftists can "help fuel a democratic revolution in Venezuela" by buying CITGO gas.

Let's leave aside for the moment that Chavez rammed through constitutional changes which makes him President for life, shut down media that criticized him, passed a law making it illegal to insult him and has ordered government thugs to harass, kidnap, imprison or kill his opponents. You can digest all that here.

But what really unmasks the left is that Chavez, the "Anti Bush," is planning to use profits from CITGO to fund a natural gas pipeline running from Venezuela to Argentina, cutting straight through the blessed Amazon rain forest!

Yes, the holiest of holies among acolytes of the environmental religion are about to witness the raping of the rain forest by the very same scion of social justice that they are supporting with their buycott of CITGO gasoline.

Save that little tidbit for the next time some greenie accuses President Bush of destroying the planet. Warning: don't stand too close, their head might pop!

The Bottom Line: DRILL FOR OIL!

The situation we face regarding energy will only get worse, not better, unless strong measures are taken. President Bush's Energy Security Plan has many fine long term solutions like hydrogen fuel cells and shorter term solutions like increasing ethanol use.

But the transition over the next two decades to an energy supply independent of petroleum will not be possible without exploiting existing crude oil resources during this period. Failure to meet the demands for freely available and reasonably priced energy will choke the very economy we depend on to fund the development and implementation of alternatives.

It's time to tell the demagogues using this issue for partisan gain to shut up and do the right thing.