Oil down, dollar up since Bush rescinded drilling restrictions

posted at 10:00 am on July 23, 2008 by Ed Morrissey

Don’t look now, but investors and speculators have taken notice of the political metamorphosis among Americans on domestic drilling — even if American politicians have been slower to do so.  Since George Bush rescinded the federal moratorium on off-shore drilling and since demand for higher domestic production has increased in the face of $5 per gallon gasoline, the price of crude has dropped over $20 a barrel in less than two weeks.  The stock market has improved and the dollar has strengthened at the same time:

Overseas stock markets were higher and Wall Street index futures pointed to a solid open as the cost of oil retreated further and traders turned a bit more hopeful about the economy.

Light sweet crude oil for September delivery was down $2.17 at US$126.25 per barrel on the New York Mercantile Exchange, after dropping more than $3 in the previous session as Hurricane Dolly looked likely to avoid oil installations in the Gulf of Mexico.

Crude now is down by more than $20 a barrel from its July 11 peak above $147 – a surge that had raised worries that inflation would cripple the economy.

It’s amazing what the promise of more supply can do for market psychology. And it goes beyond a few hundred thousand barrels of oil a day, what Bush tried to beg out of the Saudis earlier this year. According to this Bureau of Land Management release yesterday, the potential for oil shale recovery alone could far outstrip the known reserves in the Middle East:

The Department of the Interior’s Bureau of Land Management today published proposed regulations to establish a commercial oil shale program that could result in the addition of up to 800 billion barrels of recoverable oil from lands in the western United States. …

In remarks last month calling on Congress to expand domestic energy production, President Bush noted the “extraordinary potential” of oil shale resources on public lands in the West. According to the U.S. Geological Survey, the U.S. holds more than half of the world’s oil shale resources.

The largest known deposits of oil shale are located in a 16,000-square mile area in the Green River formation in Colorado, Utah and Wyoming. Shale formations in that area hold the equivalent of up to 800 billion barrels of recoverable oil. Federal lands comprise 72 percent of the total surface of oil shale acreage in the Green River formation.

Currently, the US uses 20 million barrels of oil a day, 12 million of which we import. We also import refined gasoline, thanks to a lack of refining capacity in the US. The reserves in the Green River formation would supply us with 182 years of what we import now, or 109 years at our total rate of consumption.  Once in motion, Green River alone could give us complete energy independence far beyond the time we need to find alternatives to fossil fuels.

That would be environmentally less risky than off-shore drilling, although as Jazz Shaw wrote on Monday, the risks there don’t come from drilling as much as it does from storage:

They go on to list some fairly remarkable numbers. There were a total of 125 reported incidents of oil spillage from rigs, platforms and pipelines. “Those spills did not occur due to loss of control of the producing wells.” The MMS defines a “major spill” as one where 2,381 or more barrels of oil are lost. None of the incidents qualifed as a “major spill” and in fact, a grand total of only 16,302 barrels were lost from those 125 spills. On top of that, the oil that was lost didn’t come from equipment failures in the rigs. As per the report, “Oil losses were mostly limited to the oil stored on platforms that were damaged or oil contained in individual segments of pipelines that were damaged.”

According to a report on “Oil in the Sea” from the National Academy of Sciences (1995), far more oil enters the ocean from natural, underwater seeps than from offshore production platforms. In fact, the seeps introduce about 1700 barrels of oil a day into U.S. marine waters, which is about 150 times the amount from oil and gas activities.

No matter what energy source man uses, risks accompany it.  We should work to minimize those risks, but we shouldn’t allow ourselves to get paralyzed by the necessity of doing so.  As the data Jazz references demonstrates, the risks of OCS drilling have been tremendously reduced over the last several decades, and the technology for extracting the oil has improved at the same time.  We can get more, and get it cleaner, than ever before.

Balance that with the risks of transferring vast sums of wealth to nations like Saudi Arabia, Iran, and Venezuela by having de facto price supports with our refusal to add supply to the market.  The risks to our national security and our economy far outweigh the risks of unleashing our domestic production.  Undercutting oil prices should be our national policy, if only to keep cash out of the hands of dangerous despots with ties to terrorists such as Hezbollah, Hamas, and FARC.

Everyone would love to see a new, clean energy source replace oil — but it has to be reliable and mass-produceable.  We can work in parallel to find and develop that source, but until then, we need to start acting like responsible adults and take charge of our own energy needs with our own vast resources.


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Incidentally, nuclear plants require ultra purified water, so technology has been developed to desalinate and purify ocean water and municipal gray water. Plus they generate plenty of energy for the job. Goodness knows how much water they could collect, clean, and distribute.

Integrating nuclear power plants would be a HUGE part of the solution.

RushBaby on July 23, 2008 at 1:02 PM

Wyznowski on July 23, 2008 at 12:34 PM

Shale is being drilled all over the US. Alaska, N.D., Utah, CO, WY, OK, TX, KY (areas), etc. Shale is easier to produce then people realize, it is the sulfer factor that is the issue and that makes it more expensive to refine.

upinak on July 23, 2008 at 1:03 PM

Water is life, and reallocating it is a recipe for civil war.
I kid you not.

ChrisM on July 23, 2008 at 12:54 PM

absolutely!! our entire way of life is based upon those rivers. we live with the floods and the droughts. they make us what we are, think mark twain..

right4life on July 23, 2008 at 1:43 PM

All the cow patties on earth are not a drop in the bucket to the fertilizer requirements of the US alone. Looks good on paper but doesn’t work in reality.. Sort of like wind and solar power.

Oldnuke on July 23, 2008 at 12:54 PM

the whole point is we could grow plants without oil-based fertilizers…our forefathers did, but we cannot grow anything without water.

right4life on July 23, 2008 at 1:45 PM

No water for oil!

pedestrian on July 23, 2008 at 12:35 PM

good one!

right4life on July 23, 2008 at 1:46 PM

You guys panicking over “They’ll take all our water” just don’t realize how much water is in the Mississippi–if we DID take it all, the entire west would probably die from too much water. Don’t worry–there’s plenty of water there to be had.

Vanceone on July 23, 2008 at 12:32 PM

no there is not. pretty much anything one state does with the river results in a lawsuit by another state…

Nixon to sue Corps of Engineers over planned May 1 spring rise on Missouri River
Jefferson City, Mo. — Missouri Attorney General Jay Nixon said today that his office will file a lawsuit this week seeking an injunction against the U.S. Army Corps of Engineers over the Corps’ plan to release water from upstream reservoirs on the Missouri River in a “spring rise” beginning May 1. Nixon says the routine use of a man-made spring rise at this time of year could threaten hundreds of thousands of acres of farmland in Missouri.

link

right4life on July 23, 2008 at 1:52 PM

right4life on July 23, 2008 at 1:45 PM

I understood your point. My point is that our forefathers fed a population much smaller than todays. They did not get the crop yields that are attainable today through chemistry. You’re right we can grow food without chemical fertilizers just not enough. Who starves?

Oldnuke on July 23, 2008 at 1:56 PM

right4life on July 23, 2008 at 1:45 PM

R4L, the fore-fathers used methods that we do not have in place today due to the way of the environment. Before you go jumping on me, the farmers in the 30-40′s had to change how they plowed due to the dirt losing it’s potential and drying up and blowing away as well as using trees as a shirting for the wind, so it wouldn’t pick up the dirt and take it else where.

Also we used methods back then that we would never do now. At one time, farmers used so much fish and fish waste on soil for their crops that the water began to taste fishy in their wells. They learned to interchange pig and cow waste for the fish, but yet the fish still gave the crops more or a boost then the manure. Nitrates are good but overloading can be bad. And the fact if the animals are sick they will make you sick as well.

When farmers found that soil from volcanos or areas of volcanos, or soil that was in the area of methane deposits (they didn’t know it was a deposit, they just smelled the gas) grew better, they took that soil and transferred it on their lands which helped grow a better crop.

Farmers have been doing this for eons. England has areas of huge volcanic ash, but no known volcano that has blown in that area… because it was shipped in. Greece knows that ash from a volcano makes a better wine in 2 yrs time.

There are other ways to “fertilize” that is natural.

upinak on July 23, 2008 at 2:10 PM

You’re right we can grow food without chemical fertilizers just not enough. Who starves?

Oldnuke on July 23, 2008 at 1:56 PM

I don’t understand the fixation with this. what you say is obvious. but its even more obvious that we can’t grow crops without water.

right4life on July 23, 2008 at 2:12 PM

Before you go jumping on me, the farmers in the 30-40’s had to change how they plowed due to the dirt losing it’s potential and drying up

my father had to leave the midwest because of the dust-bowl, and go to CA to work. he came back after his father died…but the biggest problem in the 30s was a huge drought, the dust bowl, and yeah we manage the farms much better now, and have much more concern with the topsoil.

its also interesting that many of the all-time high temperatures in the midwest were set in the 1930s…global warming of course, before the global cooling in the 70s…

the whole point was that we cannot do without water in the midwest, we use it to drink, for transportation, to grow crops, for recreation, for power generation.

and we will fight tooth and nail to keep it from being diverted out west for any reason.

right4life on July 23, 2008 at 2:18 PM

right4life on July 23, 2008 at 1:52 PM

Shale can’t be exploited without water. We would all benefit from shale exploitation. Is it swell with you if the water to do so is taken from an area without adequate water resource? Would you complain about fairness if someone else provides the water through major sacrifice while you benefit from the oil? This has nothing to do with quenching the thirst of illegals or trying to solve California’s ecology obsession. It is an attempt to solve a large portion of our energy problems and, as presently done, requires a water resource to do so. It will also require cooperation from all who benefit.

a capella on July 23, 2008 at 2:20 PM

as far as thinking we have all the water in the world, we do have droughts here too, its not always flooding…last year we were pretty dry, this year we have a flood. its life in the heartland.

right4life on July 23, 2008 at 2:22 PM

right4life on July 23, 2008 at 2:18 PM

Well the Mississippe is re-stocking the aquifers around that area. I hope other States get some rain.. hell they can have mine.

But what is the issue isn’t just water.. it is clean water. You can only do so much.

And I do not believe in Global Warming. If it was true… it wouldn’t have been such a crappy summer here. I feel like I live in Seattle right now. With that said I have noticed that the seasons have changed a little… but maybe it is enough that it is screwing up the crops as well.

But on your comment the temp highs that were in the 1930′s during the dust bowl era. Do you think they would have been that high if the farmers had done smaller more condensed crops per acre? I think it may have helped. But we will never know.

upinak on July 23, 2008 at 2:24 PM

btw I am very tired and not paying attention to my spelling. I know I spelled mississippi wrong.. excuse me.

upinak on July 23, 2008 at 2:25 PM

Would you complain about fairness if someone else provides the water through major sacrifice while you benefit from the oil?

I’m not complaining about ‘fairness’. its simple, its our water, and none of the states along the river are just going to sit back and let that water be taken for oil, or anything else.

It is an attempt to solve a large portion of our energy problems and, as presently done, requires a water resource to do so. It will also require cooperation from all who benefit.

missouri will not directly benefit from the drilling in colorado…no jobs, taxes, etc.

if Colorado wants to get the oil shale, which I support, let them come up with the water, without taking it from other states.

if you want the oil in that shale, and think you’ll take water from the midwest to get it…it’ll never happen

right4life on July 23, 2008 at 2:26 PM

Do you think they would have been that high if the farmers had done smaller more condensed crops per acre? I think it may have helped. But we will never know.

upinak on July 23, 2008 at 2:24 PM

interesting, but I doubt it…I think the temperatures are beyond our control. vast forces at work…I went to Jasper last year, the columbia icefields….they’ve been receding since 1844….nothing we can do one way or the other.

right4life on July 23, 2008 at 2:27 PM

upinak on July 23, 2008 at 2:25 PM

upinak,
Switch to FireFox, it has a built in spellchecker for anything you type on the web.

Without it, my comments would be even more unintelligible than they are.

ChrisM on July 23, 2008 at 2:41 PM

ChrisM on July 23, 2008 at 2:41 PM

Work and home computers are different. Work I have no say so. But thanks!

upinak on July 23, 2008 at 2:48 PM

Shale is easier to produce then people realize, it is the sulfer factor that is the issue and that makes it more expensive to refine.

upinak on July 23, 2008 at 1:03 PM

Very true. The EPA requirement for ultra low sulfur diesel has added another layer to the cost of refining on top of the “sour” crude sources more readily available. Thank you Algore…

Wyznowski on July 23, 2008 at 2:52 PM

Oh come on people! We won`t see any effect from drilling until 10 years from now. Best do what Al Gore says and we`ll have green energy within…….um, 10 yrs from now?

:)

ThePrez on July 23, 2008 at 3:07 PM

why? so you can keep importing more and more illegal aliens? find your own water, desalinate the ocean, but think again before you steal the midwesterner’s water.

right4life on July 23, 2008 at 11:55 AM

It’s massive project, but I’m a midwesterner too. So I guess I’m advocating the theft of my own resources. Only it’s not theft if the capital risks are shared by seller and the buyer.

Labor will be needed. I hope it doesn’t have to come from other countries. We should have plenty of people to do this work already in the United States with legal documentation. I hope their hip to relocation for a few years if not permanently. The jobs should pay at least as well as the Teamsters were paid for the Alaska pipeline.

gabriel sutherland on July 23, 2008 at 3:07 PM

I think most of us agree in general. Drill wherever there’s oil and drill now. I’ll leave the technical details to the people who are going to do it.

Oldnuke on July 23, 2008 at 3:13 PM

The pie chart reminds me about an incident I had when I took a far lefty friend of mine to the beach in April several years ago. We got ‘beach tar’ on our feet. We blamed the oil companies for drilling in the ocean. Well, now I know that the oil was from NATURAL SEEPAGE. If only I knew then what i know now. Thank God for real science and the transmission of facts.

Christine on July 23, 2008 at 3:27 PM

Not enough water in the Miss.? Please, I used to work on a boat in the Gulf of Mexico. Have you ever seen how far the fresh water goes out into the Gulf before it becomes as saline as the rest of the gulf? At least a hundred miles.

I can’t believe anyone could take enough water out of the Mississippi to make that much of a difference. I haven’t seen one link put up that claims there’s not enough water in the river, just links complaining that releasing more water upstream threatens farms and communities downstream; doesn’t sound like there’s a shortage issue.

But If you can convince me then take it out down near nawlins, believe me, they won’t mind!

The rest is engineering (blithely says the engineering-ly challenged Business Degree Major)

But look at the benefits; a whole new industry moving Miss. water west, jobs, business development, etc Could you pump water into those depleted aquifers? Would you want to?

E9RET on July 23, 2008 at 3:32 PM

can’t believe anyone could take enough water out of the Mississippi to make that much of a difference. I haven’t seen one link put up that claims there’s not enough water in the river, just links complaining that releasing more water upstream threatens farms and communities downstream; doesn’t sound like there’s a shortage issue

guess you missed this quote from a link I provided:

We have a resource that looks large and endless, but it’s just not true,” says Stephen Mahfood, director of the Missouri Department of Natural Resources.

The water wars are engulfing three rivers and three main battlefronts. The mother of all battles is over North Dakota’s proposal to divert Missouri River water for irrigation and other purposes. The second is a federal plan to further manipulate the amount of water in the Missouri. And the third fight is locks and dams on the Mississippi and Illinois rivers.

But look at the benefits; a whole new industry moving Miss. water west, jobs, business development, etc

get your own water, and stop trying to steal ours.

right4life on July 23, 2008 at 3:46 PM

Only 22 miles of the Garrison Diversion remain to be completed, and to Missourians, it’s 22 miles to hell. The Garrison Diversion is 150 miles of open canals—some as deep as 114 feet—that would divert and consume enough Missouri River water in a single day to fill 4,000 football fields a foot deep from end zone to end zone. After years of intermittent construction, Congress has yet to authorize completion of the diversion or allow the pumping of Missouri River water, but a new study of the matter is underway.

“It’s like the camel getting his nose under the tent,” Walker says. “You start allowing these diversions for the Missouri River, and you don’t know where it will lead. But you worry that the Missouri will start to resemble the Colorado River where it just kind of disappears at the end because all of the water has been diverted.”

U.S. Rep. Kenny C. Hulshof (R- Columbia, Mo.), fears the diversion could mean nothing less than the shutdown of barge traffic on the Missouri. “The (diversion) plan would not allow for navigation along the Missouri River and could seriously impact Mississippi River navigation.”

everybody wants a piece of those rivers…and they’ll kill the goose…

right4life on July 23, 2008 at 3:49 PM

right2bright, I’ve been saying the same thing. Put simply, If all the traitorcrats in congress announced they now support drilling every possible US location, the price of oil would drop to $30 a barrel overnight.

And every one of us knows that is so. If they had agreed to drill ten years ago, we would not be paying $5 a gallon for gas and everyone knows that too.

dogsoldier on July 23, 2008 at 11:47 AM

Every year,vendors come in with a price increase, I tell them I am moving my business to their competitor…magically they find a better price.
What you know isn’t rocket science, it is competition or the threat of competition.
Pretty basic stuff…

right2bright on July 23, 2008 at 4:29 PM

Hmmm, to quote Linus,

I’m never quite so stupid as when I’m being clever

But do you also think that diverting the water near the end of the river would also threaten the resource?

E9RET on July 23, 2008 at 4:31 PM

get your own water, and stop trying to steal ours.

right4life on July 23, 2008 at 3:46 PM

Well, I think you guys are fighting a fight from over 100 years ago.
From the beginning of time…who owns the water.

right2bright on July 23, 2008 at 4:35 PM

But do you also think that diverting the water near the end of the river would also threaten the resource?

E9RET on July 23, 2008 at 4:31 PM

don’t know, but given the history of states, people, everyone fighting over water…..

right4life on July 23, 2008 at 4:43 PM

who owns the water.

right2bright on July 23, 2008 at 4:35 PM

its a never ending fight..and will probably spark the next mideast war.

right4life on July 23, 2008 at 4:44 PM

Even better news (for me personally) is the XM/Sirius merger is all but done. 2 Dems against, 2 Repubs in favor, and the final vote is all but a guarantee from another Repub right now. Granted, I’m no big wallstreet baller, but the news earned me $300 today! Now if I could just get my damn stimulus check. I’m not in desperate need, but I’m pissed that the idiotic IRS screwed something up and I have to wait 6-8 extra, when I was already going to be one of the last to get my check. ABOLISH THE IRS!

RightWinged on July 23, 2008 at 5:27 PM

But, but, but drilling will not lower oil prices. But, talking about drilling will.

Johan Klaus on July 23, 2008 at 7:11 PM

I had a phone call invitation to participate in a town-hall-type conversation with my Republican representative earlier this evening on energy. He has been active in pursuing energy issues for years.

He indicates that there are both Republicans and Democrats in the House working on assorted bills and amendments to address energy issues, including off-shore drilling, shale oil, coal gasification, etc. Their thrust also is to use tax revenues from expanded use of our resources to provide tax incentives for developing alternative sources of energy, to provide tax credits to citizens who use energy-efficienat heating, transportation, etc.

The problem is that the Speaker of the House will not allow ANY of these bills or amendments to come to the floor.

It’s not that we have an unresponsive Congress necessarily; it’s that we have retrogressive leadership there, who are more responsive to environmental Luddites.

While he may not be your rep, check out what Congressman Tim Murphy of Pennsylvania has to say at http://www.murphy.house.gov. He would probably welcome your observations and questions, for he is knowledgable on this issue. Pennsylvania has loads of natural resources and people of technical knowhow that would supply many of our energy needs, provide jobs, and increase tax revenues.

onlineanalyst on July 23, 2008 at 10:18 PM

upinak on July 23, 2008 at 2:48 PM

If your work puter has a word processing program, type up your comment there, spell check, then copy and paste in the comment input area here.

Chimpy on July 23, 2008 at 10:22 PM

If I understood Rep. Murphy correctly, coal gasification provides a cleaner, more energy-efficient source of energy than ethanol.

Does anyone know anything about this process?

onlineanalyst on July 23, 2008 at 10:34 PM

The environmental offshore drilling disaster myth…

The Gulf of Mexico rigs with the path of hurricanes Rita and Katrina….

Now…someone supply the map of the dead and dying beaches along the Gulf Coast……..

waiting……

Limerick on July 23, 2008 at 10:20 AM

And if you go fishing in the gulf, you will see the most boats around the oil rigs.

Johan Klaus on July 24, 2008 at 1:11 AM

Now if I could just get my damn stimulus check. I’m not in desperate need, but I’m pissed that the idiotic IRS screwed something up and I have to wait 6-8 extra, when I was already going to be one of the last to get my check. ABOLISH THE IRS!

RightWinged on July 23, 2008 at 5:27 PM

Heh. The IRS helpfully applied my stimulus check to what I still owed for last year without me ever seeing it. Somehow, I don’t feel all that economically stimulated.

aero on July 24, 2008 at 2:05 AM

Ed, you are truly an idiot. Not even the Bush Administration has publically made this claim. Bush is not EF Hutton and OPEC certainly doesn’t alter is demand-pull pricing as a result of the mixed and jumbled words that Bush is able to muster.

DanKenton on July 24, 2008 at 4:03 PM

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