Ric and Roll

politicalprof:

So at one point of the Republican “debate” last night, the mutually-interrupting blatherings of the various candidates turned to the Republican shibboleth that the United States has vast untapped resources of oil and gas and that if we just drilled for them—often in environmentally sensitive areas—we would no longer be in the thrall of big oil and/or nations like Saudi Arabia. Drill, baby. Drill.

Whatever the technical merits of this argument—as a political science professor, I make no claims to any expertise on how much oil and gas lies under American territory—it is utterly and absolutely wrong in its business model. (Which is quite something from the party that claims to “get” business.)

There is simply no such thing as “American” oil.

Think about it: if we start drilling in the Arctic National Wildlife Refuge (ANWR) in Alaska, or in the deep(er) waters of the Gulf of Mexico, or your back yard, or mine, who, actually, will do the drilling? The United States?

Of course not. The oil or gas is drilled by corporations of various sizes ranging from wildcat, low-budget start up operations through Exxon/Mobil. If such companies wish to drill on land owned by the federal government, they have to pay the US a licensing fee. (And not much of one, as it happens—in order to encourage speculative drilling, fees are low since most wells don’t pay off.) 

This, by the way, is exactly what these companies have to do if they want to drill on land owned by a state government—or by you and me. They pay us a fee and drill.

The thing is, the stuff that comes out of a successful well doesn’t belong to you and me. Or the state or federal government. It’s owned by the company that drilled for it, produced it, and shipped it to market. It’s not “America’s oil.” It’s Exxon’s. And BP’s. And Shell’s.

And believe me: Exxon doesn’t think of it as “American oil.” They think of it as a commodity sold on a hyper-competitive global market. If American refineries will pay an oil company $80 a barrel, but Chinese refineries will pay $100 a barrel, the oil gets shipped to China—regardless of where it is drilled. While increased US production might—might!—reduce prices by increasing the supply of oil available on the global market, it’s not because the oil was drilled in America. It’s because increases in supply led to decreases in prices. 

(Note that major producers like Saudi Arabia and Venezuela can easily offset any price reductions on the global market related to increased American oil production simply by reducing the amount of oil they produce themselves. Ever heard of OPEC, anyone?)

At the end of the day, the “drill, baby, drill” people aren’t trying to make sure “American” oil stays in “America.” They’re trying to give oil companies more chances to extract oil to sell on the global market at a profit. “Drill, baby, drill” isn’t a “buy American” campaign. It’s a “make money for the oil companies campaign.” 

The only “American” oil is the stuff in the Strategic Petroleum Reserve. Or what’s in your gas tank. And we only have that because we bought it on the global market—just like we will in “drill, baby, drill” America.