(04-02-2010 04:44 PM)JOwl Wrote:  I'm sorry, I didn't mean to misstate your premise. My intent was to summarize your points to make sure that we were talking about the same thing. I would appreciate any clarification.
So rereading your earlier comment and now reading this one, I'm getting that your concern with this plan is that oil companies won't even be interested in exploring the areas, given that there's uncertainty over whether they'd be allowed to move forward with production. And then once the oil companies decline to explore, the left will lock them out from future opportunities to explore. Is that right?
[Note: Tone is very difficult convey in this sort of discussion. I'm honestly trying to get on the same page as you in order to have a meaningful conversation. If anything I wrote above comes off as snarky or confrontational, that wasn't my intent.]

Sorry to lash back. As you say, tone is difficult to convey, and it's hard to know whether the objective is reasonable discussion or not. Seems pretty clear now that reasonable discussion is what you want.

I think you've expressed pretty much the risk that bothers me. I'm not sure exactly how this will play out, but I think it is a risk.

Oil companies generally are not interested in spending money to check out areas where they don't expect to be able to drill. In this case, would they foresee sufficient PR benefit from going out there and acting interested to justify spending millions to do it? Maybe, but that's not generally how oil and gas industry management thinks.

I can see that they might see a benefit to doing it with the idea that if they found something with the potential of a Tupi/Campos/Santos/Espirito Santo structure out there, they might be able to convince voters to vote for politicians who promised to open it up. But I think that's too far a reach for anyone actually to act on it.

Bottom line: If I were an energy company executive, I see nothing in what I have read of Obama's proposal that would induce me to spend a nickel in the "exploration only" areas. The economics just aren't there, particularly if subsequent lease sales are not certain.

Do I believe that every one of the actual execs will agree with me? Maybe, but probably not. If so, time will tell who is right.

(04-02-2010 03:40 PM)Gravy Owl Wrote:  I have not generally been a big Obama fan, but I think he deserves some credit for making a move that doesn't help him politically. It's costing him on the left without gaining much support from the right.

If he is doing it just because he thinks it is the right thing to do, yes.

But I doubt that is why he is doing it.

(04-02-2010 03:40 PM)Gravy Owl Wrote:  With all that said I think that eventually everything is going to be used. Most of the low-hanging fruit has already been picked. The Middle East will eventually sell everything they have either to us or somebody else, and we will eventually drill everywhere we have. To me the questions are how long does it take and how smooth is the transition.

True. I used to subscribe to a version of this theory. Let's burn their oil while it is cheap, let them run out and we will be in the catbird seat with our unused reserves. But it seems that reserves not only will last a long, long time, the time they will last for keeps expanding as new fields are discovered, new technology is developed making previously unattainable deposits available, and the economic incentive keeps growing. China and India alone will provide enough demand to make it economic to go after the high hanging fruit.

If the world is going to run out of oil in 50 or 100 or 200 years doesn't much matter to us, as most of us and most of our grandchildren will not be around for that. First, burn oil while we develop the alternative energy sources over the next few decades, so that as oil dwindles, so does oil dependence. Second, drill it now and drill it here, because doing so adds, here and now, American jobs, American economic prosperity, American tax revenues, and reduces the clout of anti-American oil producing countries. Oil will be produced somewhere in the world to meet demand, so environmentally it is better to produce under American controls than in places like Nigeria, with much more potential for environmental disaster. Sounds like a win-win-win-win-win situation, as long as reasonable envoronmental controls are maintained, and in America today, that IS going to happen.

I really don't understand the opposition to developing our reserves, if it is done in conjunction with developing alternative energy. If we really want No Blood for Oil, let's use our own first, as we wean ourselves off it.

(04-02-2010 05:57 PM)OptimisticOwl Wrote:  

(04-02-2010 03:40 PM)Gravy Owl Wrote:  With all that said I think that eventually everything is going to be used. Most of the low-hanging fruit has already been picked. The Middle East will eventually sell everything they have either to us or somebody else, and we will eventually drill everywhere we have. To me the questions are how long does it take and how smooth is the transition.

True. I used to subscribe to a version of this theory. Let's burn their oil while it is cheap, let them run out and we will be in the catbird seat with our unused reserves. But it seems that reserves not only will last a long, long time, the time they will last for keeps expanding as new fields are discovered, new technology is developed making previously unattainable deposits available, and the economic incentive keeps growing. China and India alone will provide enough demand to make it economic to go after the high hanging fruit.
If the world is going to run out of oil in 50 or 100 or 200 years doesn't much matter to us, as most of us and most of our grandchildren will not be around for that. First, burn oil while we develop the alternative energy sources over the next few decades, so that as oil dwindles, so does oil dependence. Second, drill it now and drill it here, because doing so adds, here and now, American jobs, American economic prosperity, American tax revenues, and reduces the clout of anti-American oil producing countries. Oil will be produced somewhere in the world to meet demand, so environmentally it is better to produce under American controls than in places like Nigeria, with much more potential for environmental disaster. Sounds like a win-win-win-win-win situation, as long as reasonable environmental controls are maintained, and in America today, that IS going to happen.
I really don't understand the opposition to developing our reserves, if it is done in conjunction with developing alternative energy. If we really want No Blood for Oil, let's use our own first, as we wean ourselves off it.

There is one other element to add to the environmental calculus. If we produce it elsewhere, we have to get it here. From most places, that means tanker ships, and the environmental risks are much higher with a ship that with a well. People cite Exxon Valdez as the reason to oppose offshore drilling. But Exxon Valdez was a ship, not an oil well. The risk of another Exxon Valdez is higher without increased drilling and lower with increased drilling.

(04-02-2010 04:43 PM)Owl 69/70/75 Wrote:  It's not the sugar industry that has the clout, but the corn industry.

I have heard that the sugar industry inexplicably has enough pull to maintain sugar tariffs, which are why sugar is more expensive here than anywhere else. (Supposedly the tariffs are under the guise of protecting the consumer from price fluctuation. Holding prices consistently high is not my idea of protection.) On further reflection, I see that it is entirely possible that the corn industry is behind that too: artificially high sugar prices create a large market for corn-based sweetener.

Quote:If everything is eventually going to be used, and if we are transitioning away from oil to alternatives, doesn't it make more sense to use domestic oil now to ease the economic impact, rather than hanging on to it until we don't need it any more?

That depends on how much more there is, how expensive it will be to harvest, and whether it will affect our preparations for the future. I don't think there will ever be a time when we can't or won't use it. Another way of looking at delaying it is as a bet that it will be worth much much more in the future than it is now. FTR I completely understand your position on this and am playing devil's advocate a bit.

Quote:As for the cost, the other factors are already there, but the risk associated with not having clarification on drilling availability adds one too many dimensions... The problem with what he's done is that until people know that areas WILL be opened for drilling, there is no incentive to do the G&G. How much good does it do me to do the G&G and find out that there's a potential Saudi Arabia off the coast of, say, South Carolina, if there's no chance that I'll actually be able to drill it? Why would I spend millions to acquire such data without knowing that I'll be able to use it?

Okay, I can see this as a risk, but I am somewhat skeptical that n risks are acceptable but n+1 are not. They are well aware that the political landscape could be a lot different in 3 years. Even assuming the Ds remain in power, it will be very difficult for them to prohibit drilling in the new Saudi Arabia, especially since Obama supported its discovery.

Gravy, I now understand and appreciate where you are coming from, as well.

The big problem is that Americans want everything cheap. We want to protect the environment, but we don't want to pay the price. We want green energy, but we don't want to pay the price. This was the problem with Carter's energy "plan." He focused on trying to make energy cheap above everything else, and as a result we today have neither cheap nor plentiful nor green energy.

At some point, somewhere, somehow, I simply believe this is going to catch up with us. I'd rather bite the bullet now and get it over with, but that's not politically expedient when you have to reappear before the voters every 2, 4, or 6 years. I don't trust that system to produce rational answers, and I certainly wouldn't be willing to throw away a couple of million of my shareholders' dollars on the off chance that it might.

As for you n vs n+1 argument, I would say there is a big difference when the +1 is as big as it is in this case.