Questions and Answers on What to Do About Oil and Energy

Answering questions posed by the media during an election campaign is like shouting down a well. Responses never seem to sink in. The same questions are asked over and over.

Question: Won’t McCain’s plan to increase offshore drilling lower gas prices soon?

Answer: No. The Energy Department’s own Energy Information Administration admits offshore drilling will affect gas prices only many years from now, and even then would have a negligible effect on prices.

Question: Why is that?

Answer: It takes years to get oil out of the ground, then refined and into fuel we can use. Also, don’t forget that oil is a global market, so any additional oil American companies pump out of the ground merely adds to global supplies. This may slow the inevitable rise in global prices (as global demand exceeds global supply), but it won’t do much of anything for us here in the US. We take the environmental risk; we share the tiny benefits with the rest of the world. The only long-term answer to our energy problem is to reduce our dependence on oil.

Question: How do we do that?

Answer: Invest in new, non-carbon energy alternatives like wind, solar, and biomass. Encourage the development of high-mileage cars. That’s Obama’s plan. McCain has repeatedly voted against such investments, as well as higher fuel economy standards for cars.

Question: But that will take years. What about now?

Answer: Tap the oil company’s ballooning extra profits and return them to American consumers. Exxon-Mobile earned $12 billion in the first quarter of this year, far more than it ever has before — far more than any company in history has earned. Much of that sum came directly from American consumers. They should get it back. This is what Obama is proposing .

Question: But won’t this deter oil companies from exploring for more oil?

Answer. No. They’re not using their windfall profits to explore for oil as it is. They’re using them to buy back their shares of stock in order to raise their share prices. That’s good for their shareholders and executives, not for consumers.

Question: Can we do anything else in the short term?

Answer: Tap the Strategic Petroleum Reserve. Substitute the kind of crude oil that’s not in such demand right now for the kind that is. By doing this, we reduce speculation in oil, which is partly responsible for driving up the price.

Question: What’s wrong with McCain’s plan for a “gas-tax holiday”?

Answer: It wouldn’t affect supply. It would just increase demand. So gas prices would rise and consumers will see little difference in price at the pump. More of their money will flow to the oil companies instead of to the Highway Trust Fund, whose funding is already depleted.

Question: But hasn’t Obama flip-flopped on offshore drilling?

Answer: No. He’s always been in favor of allowing oil companies to use the leases they already have — a total of 68 million acres of American land and seabed that they haven’t yet tapped. In fact, he’s said they should use it or lose it. He just doesn’t want them to have more. (But he’s not an ideologue on this. He’s said he’ll support the current congressional compromise that allows a bit more offshore drilling for the sake of getting lots more investment in alternative carbon-free sources of energy.)

Question: So why haven’t the oil companies used the leases they already have, if the land or seabed contains oil?

Answer: The oil companies want to grab as much land and seabed as they can right now, when a Republican administration is in power. The more land and seabed they can get, the more they can dress up their balance sheets to impute untapped reserves. It’s an accounting game. But it’s a dangerous game for America because it would give oil companies access to all sorts of land and seabed that could cause serious environmental harm if tapped.

Question: What about nuclear? Isn’t that a good option?

Answer: It is if we can figure out how to store nuclear waste safely, and guard against the possibility that fissile material will fall into terrorist hands. Obama isn’t against nuclear power. He just wants to make sure we can do it safely.


Originally published at Robert Reich’s Blog and reproduced here with the author’s permission.

8 Responses to "Questions and Answers on What to Do About Oil and Energy"

  1. Anonymous   August 14, 2008 at 11:02 am

    Reich… You are a complete idiot.

  2. Anonymous   August 14, 2008 at 11:18 am

    Yes, he is.

  3. steve   August 14, 2008 at 4:45 pm

    another soft-headed lefty; needs to see the Pickens Plan. and by the way, does anybody out there recognize and appreciate the benefits we have enjoyed during the fossil fuels age?

  4. Anonymous   August 15, 2008 at 11:05 am

    There is an expectation on this site that one will clearly identify the points of disagreement with an article and present a logical response. If this is beyond one’s capacity, they should post elsewhere.

  5. Anonymous   August 15, 2008 at 11:57 am

    Interesting that 2 of 3 right-wing posters don’t address a single point of Mr. Reich’s comments. The comments seem to be pretty straightforward and logical. Which ones do you find lacking in credulity? Did you even read what he said?As for Mr. Pickens, his plan is to make himself a bundle of money by building wind farms, but only after the federal government picks up the tab for investment in infrastructure so that Mr. Pickens can sell his electricity. If he was sincere, of course, he would pay for, or contribute to, the upgrading of the infrastructure himself. Since he is talking about producing energy in texas and selling it to texans, he could afford it. Mr. Pickens is a proven liar, a total weasel, and is not to be trusted. He’s fooling people by waving a green flag.As for wind power itself, Mr. Reich mentions it, along with other alternatives.Mr. Reich neither praises not denies the material benefits of the fossil fuels age – Steve’s comment is a red herring. The fact is that things are changing, and success depends on adaptation to change. (Or are you also in denial about evolution, Steve?)

  6. Guest   August 15, 2008 at 9:13 pm

    The name calling and ad hominem comments made by the first three posters is reminiscent of Barack Obama’s statement: “It’s amazing, these people take pride in their ignorance.”

  7. Anonymous   August 16, 2008 at 9:48 am

    I have read many of Mr. Reich’s commentaries over the years and have usually found them to be well-reasoned and based on facts, but his description of what oil companies are doing with their leases (‘an accounting game’) is a complete fiction. Long-standing Minerals Management Service (MMS) rules assure that undrilled leases will revert to the government. From the MMS website: ‘If no wells are drilled on the block within a specified period, the block reverts to the U. S. Government and will be available at future lease sales.’Oil companies are regularly increasing their exploration budgets in recent years. These are factual errors concerning publicly available information and there is no excuse for Mr. Reich’s claims.Regarding profits, he is of course correct that oil companies care about their stock price. Like any publicly owned company, they owe this to their shareholders. Profits are large right now, but a quick look at the Yahoo Finance data will show that profit margins for the industry are about 10-12%, not excessive by any fair standard. Only 10 years ago a barrel of oil was selling for just a bit over $10. No one in the industry has forgotten that; they have a right and an obligation to be cautious with investment of their profits. When oil was $10 no one in government was offering a bailout of the oil industry; now that they’ve recovered on their own, politicians have decided their profits are ‘excessive.’ Compare their treatment to the treatment the banks are receiving today. Is their any doubt who controls the Republicans, the Democrats, and the U.S. government?

  8. Guest   August 23, 2008 at 1:50 pm

    Sounds like Kudlow followers (cancer) are on board here.