It seems that I cannot criticize absurd proposals from pandering politicians unless I have some magic wand solution – at least according to a couple of AB readers. Well – I’ve just outsourced this task to 2Dinar:
A large portion of Americans, including those in the White House, think that drilling for oil domestically could help reduce America’s reliance on foreign oil and help us reclaim a measure of energy independence as well as alleviate the economic downturn that current oil prices are inducing. This week the Times reported that President Bush is seeking to repeal a ban against offshore drilling in Florida that his father President Bush (41) implemented. He and Vice President Cheney have long campaigned for exploitation of the Arctic North Wildlife Refuge (ANWR) in Alaska, but have been defeated in Congress. Should we pursue a domestic drilling strategy to help stem foreign oil dependence? Long answer: Yes, if we were Saudi Arabia. Short answer: No.
You might wonder if we’ve lost our marbles by assuming Saudi Arabia is part of the U.S. Well, that’s nothing another 8 years of neocon rule couldn’t solve. More seriously, 2Dinar notes:
Oil is a highly volatile commodity, and as the lifeblood for industry, its value is analyzed, gambled on, and traded just like debt, which means that intangibles outside of the world of refinement and distribution can drastically affect its price. Additionally, worldwide demand from growing economies (including ours) has increased while the oil industry has not grown its production or reserve capability at a comparable rate. An article by Keith Sill, an economist with the research department of the Philadelphia Fed, said that most oil shocks have been associated with conflict in the Middle East, and indeed, without even counting the major wars in that region, concerns about the vulnerability of the Saudi oil production apparatus to terrorist attack have probably floated the oil price substantially on their own. Oil is volatile, and its price reflects far more than simply how much OPEC is pulling out of the ground. Of the world oil reserves, estimated at 1.1 trillion barrels, 23% is located in Saudi Arabia, 16% in Canada (the largest supplier of oil to the US), 12% in Iran, and 10% in Iraq. The US holds less than 3% of the world’s proven reserves. Despite these statistics, the US accounts for 26% of world oil consumption, a staggering 20.8 million barrels a day and over 1.4 times the total consumption of the EU despite having an economy 12% smaller than the EU and a population 39% smaller.
On second thought, maybe we should ignore the neocons and their call for more wars in the Middle East. OK, we’d have to pay the Saudis for their oil but with less instability, I think both we and they would be better off.