White House Chronicle

News Analysis With a Sense of Humor

Obama on Oil’s Slippery Slope

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Way back in the 1970s, the old Mobil Oil Company paid $212 million for an oil shale lease in Colorado. The company did not produce a single barrel of oil from that lease. After leasing the land, Mobil shied away from developing the resource because of substantial environmental problems, involving water and degradation of the high desert.

Traditionally, oil companies have taken leases that they have had to abandon either because the resource was not as substantial as they had hoped, or because the economics had changed or as in Colorado, other impediments appear.

Also, there are physical limitations on where the oil companies can look for oil. And sometimes the judgment of their geologists is just wrong. Even in this age of seismic sophistication, there are dry holes.

A modern deep-sea oil rig is nearly as complex and sophisticated as a refinery. Every off shore rig (there are a little over 400 of them around the world) is working flat out; sometimes in the service of international oil companies, and sometimes in the service of state-owned oil companies, which control a majority of the world’s resources.

When it comes to offshore drilling, the oil industry feels that there would be a better chance of finding reserves in new leases rather than old leases, which they acquired defensively at a different time.

To the Democrats, this is evidence of oil company ineptitude and greed. To the oil companies, it is a situation reminiscent of the David Mamet play “Glengarry, Glen Ross,” where the real estate salesmen are denied the best prospects in order to shift lousy inventory.

The best oil-drilling prospects are in the eastern Gulf of Mexico and the Arctic National Wildlife Refuge (ANWR). Not only do these areas have the best expectation of good reserves, but there is already a sophisticated infrastructure in place in the Gulf and Alaska. No such infrastructure exists on the Atlantic Coast or the West Coast north of Santa Barbara. Infrastructure is important because it reduces cost, and especially because it speeds the time it would take to bring new oil to market.

The drilling controversy has been a gift to the Republican Party because it enables John McCain to go after Barack Obama on an issue that people understand: the price of gasoline. Seventy percent of Americans, according to the polls, favor drilling offshore now. Yet Nancy Pelosi, speaker of the House, refuses to allow an up or down vote on this simple issue. She wants a vote to be part of a larger energy and environment bill.

Pelosi is handing the best issue yet to John McCain. The public cannot understand many of the complex problems confronting the country, but it can understand the price of gasoline, even if new drilling will not lower that. It does not matter to the public that it was a Republican president, George H.W. Bush, who originally blocked drilling in the Outer Continental Shelf, or that John McCain was a supporter of not drilling there and still opposes drilling in ANWR.

The Democrats have boxed in their presumptive presidential nominee. Unless Pelosi softens her position, the issue is going to dog Obama through to the election. Even if he comes out in favor of drilling, he is vulnerable to McCain’s attacks if he is at odds with the speaker of the House.

Democratic antipathy to Big Oil goes back many decades. To many Democrats, the dislike of Big Oil is visceral. They have convinced themselves that somehow the oil companies represent a malign international conspiracy to block alternative energy sources and to run up prices. The left wing of the party has never been able to separate the oil industry from John D. Rockefeller and his kerosene cartel.

For their part, supporters of more drilling onshore and offshore are overselling what can be expected in the way of new supplies. The United States has about 2.5 percent of the world’s oil reserves and consumes about 25 percent of the world’s oil. Nothing can be done about the former, so something will have to be done about the latter. Right in the front of doing something about the latter are–surprise, surprise–the oil companies. British Petroleum has enormous investments in alternative energy, including hydrogen. And Chevron, as it likes to remind us, is the largest geothermal producer in the United States.

The oil companies are not perfect, but they are quite good at what they do: getting oil out of the ground and to your local gas station.

Bad Energy Vibes from Obama, Odd Ones from McCain

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Memo To Sen. Barack Obama: Beware of your friends and their opinions.

For example, Rep. Edward Markey was on a Sunday talk show allegedly defending your position on offshore drilling. But, in fact, the Massachusetts Democrat was defending his own long-held and irrelevant views. You just had an epiphany on campaign finance. Now, you need to have one on energy. At this point, the world needs oil and will need it for many decades. True, the United States will not get any new oil from the outer continental shelf for 10 years, and it will only account for about 4 percent of our needs as long as it lasts. But even that is essential.

Memo To The Friends Of Sen. John McCain: Just when you thought your candidate had settled down to be George W. Bush Lite, he up and proved that old mavericks cannot change their ways. McCain split the difference on oil by reversing himself on outer continental shelf drilling and remaining adamant on not drilling in the Arctic National Wildlife Refuge (ANWR). This put Tom Ridge, the former homeland security chief, on the spot on a Sunday talk show. Ridge simply could not explain the inconsistency of McCain, whose presidential bid he supports.

No matter what you believe should be done, the irrefutable fact is that the world is in a terrible energy bind–and all the indications are that the world energy situation may get worse.

Politicians of the left want to believe that there are technologies ready to come on line, and they are being squeezed out by old-line energy companies. They place their faith in what are referred loosely as “alternatives,” which include solar, wind and geothermal power. These they see as being the equivalent of low-impact aerobics. Painless and environmentally neutral. These politicians oppose the burning of coal and have no coherent policy on oil and gas. They choose to believe that the current high price of oil is a combination of oil company greed, Wall Street speculation, and the Bush administration’s appeasement of the Saudi royal family.

Conservative politicians have as much problem facing reality as their liberal colleagues. They have an inordinate faith that current off-limits drilling areas, both in the ocean and on land, will produce untold quantities of energy for the United States. They have considerable faith in new technologies that will clean up coal, find oil at ever-greater depths, and exploit gas hydrates on the ocean floor. They also believe that oil shale in the West, abandoned in the 1970s because of the environmental consequences of mining and the shortage of water, will replace Saudi Arabia.

One thing the left and the right do agree on is that plug-in hybrid vehicles are going to help a lot. The theory is that they will make a big dent in the 20 million barrels of oil that the United States gulps down every day; that is 10,000 gallons of gasoline every second, according to John Hofmeister, president of Shell Oil Company.

There is an energy establishment, and it is of one mind on energy challenges. This is the thrust of its thinking:

l Energy conservation is essential

l The outer continental shelf should be explored aggressively, along with federal lands

l ANWR should be drilled immediately, and a natural gas pipeline from Alaska should have priority

l Nuclear power is the best substitute for the coal now being burned and to replace geriatric plant

l Coal gasification is the best way to burn coal

l Wind power works and should be encouraged; in particular, storing wind energy as compressed air needs research

l Liquefied natural gas imports need to be boosted

l The search for new technologies needs to be relentless

l Energy producers, from oil companies to wind farms to electric utilities, need consistency in public policy

The unsaid addendum to the establishment thinking is that Obama needs to get some energy advisers who have a solid purchase on the Earth, and that McCain needs to listen to his advisers. In 1974, governments fell like ninepins as the global economy was battered by high energy prices. The battering next time may be much worse.