Drilling Our way Out of the Fuel Crisis - Part II

While numerous people from Paul Krugman to Barack Obama have stepped forward to dash water on President Bush's call this week to try to drill our way out of the oil crisis, perhaps no more effective rebuttal came than one, not from environmentalists or economists, but from Red Caveney, CEO of the American Petroleum Institute.

In an oped in yesterday's Wall Street Journal, Caveney laid out the reasons that America can not drill its way out of the current crisis. Explaining to non-oil specialists, the uncertainty inherent to oil exploration, Caveney writes: "Exploration is time consuming, very costly and involves a great deal of risk. Importantly, you see neither a drop of usable oil nor a cubic fot of natural gas while it is going on." Oil exploration, Caveney argues, is a long term project, not a next quarter solution.

What prompted his oped was the "use it or lose it" proposal by Democrats to incent oil companies to drill on the 68 million acres of federal land they already lease. But the argument also neatly dispenses with the idea that drilling today has anything to do with oil prices in the near term or even over the next decade.

Adding mere "blocks on the map" as Caveney calls them to the millions of acres already open to exploration--including millions in the Gulf of Mexico at best might have a minor psychological effect on the market. However, in a business dominated by an oil cartel, the issue quickly comes down to real supply and more blocks on the map would have no impact on that. Nor will they reduce our dependence on foreign oil, wean us off fossil fuels or improve the climate.

Ironically, what now seems to be accomplishing all three of those goals is the market. But these are not the type of market forces that get votes.