Don Davis

Combating the 'Drill, Baby, Drill' Philosophy

Filed By Don Davis | May 26, 2011 8:00 AM | comments

Filed in: Politics
Tags: Congress, economic policy, election 2012, Green Energy, International, national debt, Science, transportation, White House

oil.jpgIn America, today, there are three kinds of drivers: those who look at the other gas pumps down at the ol' gas station and think, "Oh my God, I can't believe how much that guy's spending on gas," those who look at their own pump down at the ol' gas station and think, "Oh my God, I can't believe how much I'm spending on gas," and those who are doing both at the same time.

Naturally, this has brought the Sarah Palins of the world back out in public, and, once again, the mantra of "Drill, Baby, Drill" can be heard all the way from the Florida coast to the Arctic National Wildlife Refuge.

But what if those folks have it exactly backward?

What if, in a world of depleting oil resources, the last thing you want to do is use yours up?

To put it another way: Why isn't all of our oil part of the Strategic Petroleum Reserve?

Consider the inexorable logic of the Big Lie. If a man has a consuming love for cats and dedicates himself to the protection of cats, you have only to accuse him of killing and mistreating cats. Your lie will have the unmistakable ring of truth, whereas his outraged denials will reek of falsehood and evasion.

- From the book Ghost of Chance, by William S. Burroughs

So, here's the thing: We produce a surprising amount of our own oil right here in the United States (in fact, we're the world's third-largest oil producer), but we don't produce enough to cover our current use, and that's why we import about half of the roughly 19 million barrels of oil we use daily. The vast majority of that is used in vehicles or for heating. Almost none is used to generate electricity.

Our largest suppliers of oil, despite what you might think, are not all from the Middle East: Instead, they're in Canada, Saudi Arabia, Mexico, Nigeria, and Venezuela, in that order.

Perhaps you're thinking, "Canada? Oil?" Yes - Canada and Oil. They provide us with more than twice as much as Saudi Arabia from huge "oil sand" resources, primarily in Alberta; the exploitation of those resources has created a huge environmental controversy.

Examining the Numbers

An ideal situation would be one where we decide to get out of the business of using oil altogether - and to help make my point, we have some helpful numbers from a guy that you pay every day to figure this stuff out: Mark Doms. He's the Chief Economist for the U.S. Department of Commerce, and, to paraphrase Little Feat, he's always handy with a chart.

According to Doms, 60 percent of our 2010 trade deficit (about $265 billion) represents the cost of imported petroleum products, and if things continue through December as they did the first three months of this year, in 2011 every American, man, woman, and child will pay a "tax" of about $1,000 to import all of that petroleum.

Do you know what we, individually, spend on gas? In March of this year, the average household spent just over $300 on the month's gasoline - five months ago that number was $56 lower. The way it works out, every time gas goes up 10 cents per gallon, it costs the average household another $7 a month.

And that's not all: Less than half of the total cost of imported oil is paid at the pump. About 44 percent of imported oil is used by businesses. Another 15 percent is used by governments across the USA, and that means almost 60 percent of the cost of imported petroleum is "folded into" the price of everything else.

(You've seen the words "oil" and "petroleum" used liberally in this story, but the exact literal reality is that in each instance, we should really be referring to "petroleum products," and that's because we import and export not just crude oil but a variety of other petroleum products. I get tired of using the phrase "petroleum products" over and over, and I'm probably using "oil" and "petroleum" more interchangeably than I should.)

A More Responsible - and Economical - Alternative

If we were out of the importing oil business, we'd save about $300 billion a year - and, as it turns out, over a 10-year period we could actually convert the entire U.S. auto fleet to electric cars powered by windmills by providing $15,000 in cash "buy-outs" for today's 135 million gasoline cars and building the wind generation and "smart grid" we'd need to support the effort. Doing all of that would cost - wait for it - about $250 billion a year.

If I got the math right, 20 years after we first started building windmills and subsidizing cars, everything would be paid off, and every year after that the U.S. economy would generate a $300 billion "profit" on our investment - unless the price of a barrel of oil goes up. If it does, the amount of money coming back to our wallets every single year from then on, obviously, also goes up.

And if we were out of the "using oil for driving" business, once everything was paid off we could put almost $4,000 a year (in today's dollars) right back in the pocketbooks of every family in this country - which, if you ask me, represents a pretty good "tax cut."

"Drill, Baby, Drill" - Still?

Let's also keep in mind that any new oil drilled on our public lands might not necessarily end up in the United States; that's because even if oil companies were 100 percent free to "Drill, Baby, Drill" in our waters to their hearts' content, they'd also be perfectly free to sell as much of that same oil, anywhere in the world, to whatever entity might end up being the highest bidder. Today, our friends in places like India and China are desperate to be that high bidder.

Put all of this together, and you get back to the question I posed at the top of the piece: Why in the world would we be in a hurry to "Drill, Baby, Drill", when we could, instead, put all of our efforts into getting out of oil, which would save us so much money that the conversion pays for itself?

Then, when oil's running $400 a barrel or so, let's use our oil to pay China back the trillion dollars we owe them. At current production rates, that would only take about 400 days, assuming it were possible to divert all of our production for that purpose.

To state it a bit more ironically, it may be that the smartest thing we can do right now is to conserve every possible drop of oil we have until we don't need it anymore and it becomes a sort of Strategic Cash Reserve that can help strengthen the dollar and reduce the national debt in the years to come, both at the same time.

Or, to put it another way, the next time someone tells you they want to "Drill, Baby, Drill," you can step right up, look them square in the eye, and ask: "Why do you hate America?"

And won't that be fun?

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Well, it's fun, fun, fun until Daddy takes the T-Bird away. We are the squirrels who didn't put away any nuts for the winter.

One of the most important factors that should propel us to seriously pursue alternative energy are the environmental gains we stand to see.

But, of course, the money issue is what will convince the most people, so thanks for laying them out here.

Great analysis! And hand-in-hand with this is helping Americans end their dependency on cars -- creating/increasing public transportation, encouraging car-pooling, and making our roads more pedestrian- and biker-friendly! Looking forward to it!

so we're all learning the new bilerico, and one of the things we're going to have to adapt to is not responding directly to each with that in mind, here's to the new response format!

dr. weiss, i can actually picture you in a t-bird...but all is not lost.

ever see the lincvolt? neil young converted a 1959 lincoln continental convertible into a 65 mpg hybrid chrome cruiser, just to prove that green can be fun.

now i agree with you, adam, that green is its own reward, but for the folks who do not accept such an argument, this is a great way to "get in the door", so to speak - and even the most conservative amongst us love the idea of saving money in a capitalist way, so let's hit them with a discussion they can relate to as well.

and finally, a word to jessica: i am one of the addicted - but i don't really have a problem with a car addiction...if we're talking about a fleet of zero-emission cars.

now where you have intense density, more and more you can sell "park and ride" transit to commuters who are sick of it all - but if you live in a rural part of the country, you'll never get the population densities you need to develop a truly comprehensive transit alternative, and that's where zero-emission cars are an economically logical option that can be put into place a lot faster and cheaper than a transit infrastructure.

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