Bachmann's Plan for $2 Gas is a Dry Hole.

I have to be careful when I write about Michele Bachmann and energy policy. Her naivete makes me sarcastic. This response led to my story about her wanting to bring back leaded gasoline to save the domestic lead industry.

Turns out my spoof was a little too credible and a Newsday columnist reported it as fact.

Now Rep. Bachmann says her plan to open up more domestic drilling will bring our gas prices back down to $2/gallon. Not even drilling, just saying we're going to drill will scare down the price of crude. Her "No More Excuses Energy Act" would increase the nation's oil refining capacity and open up drilling in Alaska's Arctic National Wildlife Refuge (ANWR).

News Cut already has a good discussion going on the topic, so I will refer you there and just add a couple points of my own.

Commenter GregS has a number of posts in support of Bachmann's proposed bill, including this summary of his position on how increased domestic drilling will bring down the global and domestic cost of crude. It hinges on increased supply by increasing our production by two million barrels within a few years.

Here's the problem with that reasoning.

1. Global oil consumption in 2007 grew at a rate of 1.1 million barrels per day. If the U.S. could achieve those production rates, it would barely add enough to keep up with growing demand.
2. Oil-rich countries like Saudi Arabia are producing at a certain level because it's profitable for them, not because they lack the capacity. If the U.S. were to bring more crude to market, the Saudis and other producers could choose to throttle back production to maintain the overall supply — and the price.
3. Announcing our intent to drill in ANWR — where actual production would still be years away — would have far less effect on prices than, say, the Saudis announcing they will increase production, which they can do quickly.Last week, they announced their intent to increase supply by 200,000 barrels a day from June to July. They'd also increased production in May by 300,000 barrels. The price of light sweet crude for July delivery dropped 25 cents a barrel today after coming off a record high.

I'm sorry, but going to the Heritage-addled mind of Rep. Bachmann for energy policy ideas is like going to McDonald's to buy bread.

Comments

[Jim]

"Oil-rich countries like Saudi Arabia are producing at a certain level because it's profitable for them, not because they lack the capacity."

This is not necessarily true. Many oil-rich countries have demonstrably passed their production peaks, and can't produce more at any price. At least, that's what I read on the internet.

[Ollie Ox]

It's inaccurate to call this piece of legislation "her" bill or "her" plan. The "No More Excuses Energy Act" is actually the product of Texas congressman Mac Thornberry, who introduced the bill on July 2007.

Bachmann signed on as a co-sponsor on April 24, 2008, with John Kline being johnny-come-lately on June 10, 2008.

There's more to this bill than just drilling in ANWR--mainly all sorts of giveaways to the oil, gas and nuclear industry.

Hard to say which is my favorite title--but the "waste confidence" provision probably takes the yellowcake.

"The Nuclear Regulatory Commission may not deny an application for a license, permit, or other authorization under the Atomic Energy Act of 1954 on the grounds that sufficient capacity does not exist, or will not become available on a timely basis, for disposal of spent nuclear fuel or high-level radioactive waste from the facility for which the license, permit, or other authorization is sought."

This would be like mandating the permitting of hog farms, turkey barns or dairies without requiring manure management plans. That *stuff* has to go somewhere, after all.

Read more about it here:
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.3089:

[a little birdie]

It would be nice to hear Prof. Banaian say the obvious about how Bachmann's proposal is utter crap, but I'm not holding my breath.

[Charlie Quimby]

Jim is correct about the big picture, of course. I was speaking short term, and maybe should've defined "oil-rich countries" as those that are still putting less oil on the market than they can produce, which mainly means Saudi Arabia, but won't for very long. The extent of their under-production is believed to be declining and less than the Saudis claim.

Without sounding too slippery, a country that isn't selling less than it can produce isn't oil rich any more. And either way, the U.S. production increase won't have a profound effect on price. That's still not to say we won't try to go get it in ANWR some day.

[Charlie Quimby]

There you go again, Ollie... reporting, when all I wanted to do was laugh at Bachmann's grade school visual aids.

[Charlie Quimby (Devil's Advocate)]

Political Muse has more on ANWR's impact in, oh, about 2030.

http://tinyurl.com/68jabm

[Jeff Dege]

This one is worth quoting:

http://casualsundayswithmrcurry.com/2008/06/13/stupid-is-as-stupid-does.aspx

Stupid is as Stupid Does

I'd like to lose twenty pounds but I don't know what to do. After all

"You can't starve your way out of obesity."

My bills are higher than my income. I don't know what to do, after all

"You can't earn your way out of debt."

I never understand what people are talking about when they discuss the classics and I don't know what to do about it, after all

"You can't read your way out of ignorance."

I have kids to feed, a house to keep up and I need a new car. I don't know what to do, after all,

"You can't work your way out of poverty."

Nope.

I keep trying but I can't come up with an analogy that's as stupid as

"You can't drill your way out of high oil prices."

How do politicians get away with saying such assinine things and not getting called on it??

Although... Jay was out with some folks the other night and one of them actually said that he thought the high price of gas would be good for the economy. How? Well, you know; taxes and stuff.

Anyone who thinks that you can tax your way to prosperity probably believes you can drink your way to sobriety.

[Mark Gisleson]

I've been seeing posts that suggest Bachmann's plan would lower prices at the pump by 75¢ a gallon. No, the correct figure is 75¢ a barrel. [ http://www.ourfuture.org/blog-entry/offshore-drilling-comes-empty ]

I doubt these savings would even make it to the pump, not with $130/bbl oil.

I honestly can't remember the last Minnesota politician who was this out of the loop, but we had one in Iowa. H.R. Gross introduced a new bill to balance the budget in each session of Congress for well over twenty years (each one was H.R. 144, a joke of sorts). And then H.R. would turn around and vote for EVERY single military appropriation, and against every single human services bill.

And no, he was never taken seriously either.

[Charlie Quimby]

Well, Jeff, the difference between your last quote and the earlier ones is this: a) drilling doesn't actually get oil to market; b) demand also has something to do with oil prices; c) there has to be enough oil produced by the drilling to actually impact supply; and d) all those other examples involve pretty direct cause-and-effect relations, far less complex than the world oil market. Other than that, you're right.

[Jeff Dege]

>a) drilling doesn't actually get oil to market

You know, I keep hearing people tell me that there's no point in drilling, because the oil wouldn't be on the market for at least five years, so we should focus on alternative energy sources.

If someone invented the perfect battery tomorrow, that was cheap, safe, and had energy storage density that matched gasoline, how long would it be before we had replaced our current fleet of vehicles with models using the new technology?

Yep. A lot more than five years.

It's a bogus argument.

More drilling _will_ get more oil to market. Not instantaneously, true. But nothing we do will result in instantaneous change.

[Jim]

I agree with Jeff that drilling will likely bring more oil to market. Where my doubt lies is in the assertion that it will drive down prices in any significant way - i.e. it's not clear to me that the benefit would not be diluted on the worldwide market. Certainly, $2 gas seems unlikely at best. Moreover, I'm concerned that the Bachman-endorsed package of drilling ANWR, etc, is simply a short-term patch that will do nothing to address the fundamental issue that we have a fatal dependency, in every aspect of our lives, on a finite and declining resource. Drilling ANWR, etc, is sort of a last resort, akin to tapping into the 401k after the savings and checking accounts are drained and the credit cards are maxed. Soon the 401k will be gone, too, and we'll still have the problem of living a lifestyle that is incompatible with our means.

Of course, in many types of addiction, recovery becomes possible only when we hit bottom. Maybe Bachmann's plan should be enacted, such that we can finally dispense with the delusions and get on with facing the music.

[Charlie Quimby (Devil's Advocate)]

As someone who has actually worked on a drilling rig, maybe I was making too fine a point with a). Drilling is putting a hole in the ground on the assumption you can get something to come back up. Until it does, those barrels of oil in the ground are still theoretical.

Drilling is only one step in the process of getting fuel into gas tanks, and it's also the least certain, especially as places to drill productively become more scarce.

I'd never say we shouldn't drill. Just, we shouldn't pin our hopes on its declining promise.

[Rod Loper]

What about the leases they have capped and are just sitting on? What about the Wall
Street speculators ginning up the price of a barrel of this stuff?

[Charlie Quimby (Devil's Advocate)]

Pump it!