Schork Oil Outlook: Domestic Drilling Needs Less Talk, More Action
The truth is, there’s no silver bullet that can bring down gas prices right away.
But there are a few things we can do. This includes safe and responsible production of oil at home, which we are pursuing. In fact, last year, American oil production reached its highest level since 2003.
-Remarks of President Barack Obama,
Weekly Address on Gas Prices
Saturday, April 23, 2011
The more the President attempts to explain his plan to address the U.S.' energy problem, the less sincere he sounds. As if he is going through the motion of feeling our pain at the pump, not to mention at the supermarket. In his weekly radio address on Saturday, the President’s position on the rise in gasoline prices was wrought with contradictions, suspect boasts and bromides from the Birkenstock-wing of his party.
This is true; there are no quick answers. Part of the answer has been sitting up in ANWR. The U.S. Geological Survey estimates between 5.7 and 16 billion barrels of technically recoverable oil within the Reserve.
If we had tapped into ANWR in the mid 1990s when debate on the subject began in earnest, then today we would be producing enough oil to forego imports from Hugo Chavez’s PdVSA for the next 28 years. Surely that could have bought us time to invest in alternative sources of energy.
Last spring, the President appeared to appreciate the importance of domestic oil drilling, albeit with a half-hearted policy shift. In March 2010 he proposed halting development of oil production in Bristol Bay, Alaska. To compensate, oil drillers would be permitted to explore for oil off the Atlantic Coast (south of Delaware) and off of the west coast of Florida.
BP’s Macondo oil spill a few weeks later quickly put the kibosh on that plan. Instead, the White House shifted gears from embracing oil producers to demonizing them, often referring (incorrectly) to BP as British Petroleum and promising to sick his Attorney General on the company as it was trying to plug that damn hole in the Gulf.
The Schork Report advises clients to also keep this in mind: while the President boasts that oil production in the U.S. is at its highest level since 2003, this is due in large part to BP, er, we mean British Petroleum.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.