President Obama announced a four part plan yesterday that is supposed to lower prices for gasoline. To put it simply, the plan does nothing of the sort. Even the New York Times, one of Obama's biggest media supporters, described the effect of the plan this way: "But in fact the policies announced Saturday would not have an immediate effect on supply or prices, nor would they quickly open any new areas to drilling." So realizing that the plan does next to nothing to help, let's look at its components.
First, the president wants an investigation to make sure that the rising oil prices are not due to fraud or other illegal conduct. What a waste. Oil is traded on an international market where the principal suppliers are the national oil companies of countries like Saudi Arabia, Iran, Venezuela, and the like. Less than 5% comes from private companies. In other words, none of the people who control the price of oil are subject to US law so the investigation could do nothing to them. More important, it would be an impossibility for anyone to control a global market in a commodity like oil that trades so heavily. So, the first part of the plan is a public relations gimmick.
Second, Obama wants to end "subsidies" for oil companies. This is just a tax increase which singles out oil producers in the US. the so-called subsidies are actually tax deductions that are available to every other American corporation. Why doesn't Obama get upset when his buddies at General Electric make billions buy pay no taxes at all using many of the same "subsidies"? The oil companies pay heavy taxes already. The key point here, however, is not what to call the deductions. Rather, it is that raising the taxes on oil companies will do nothing, NOTHING, to reduce the price of gas at the pump. So the second part of the plan is another public relations gimmick: let's make those oil companies suffer! But it won't help in the slightest to lower prices.
Third, Obama wants to extend the leases of those whose drilling was stopped by the moratorium and subsequent slow down in issuing permits. That is supposed to allow the lease holders to go ahead with the drilling so as to restore production that is being lost without fearing that their leases will expire. This step makes sense, but it will have no effect. After all, the problem is not that the leases will expire. The actual problem is that the federal government is sitting on drilling permits and not issuing them. Before the oil leak in the Gulf, permits were approved within a week of their being filed. As of now, the average time for the issuance of the last batch of permits that were issued was about 8 months, but the vast bulk of the applications are still in limbo. Most of those filing permit applications have just received no answer at all. As a result, drilling in the Gulf of Mexico and all offshore US waters has essentially stopped. Obama needs to get the permits issued, not extend the leases.
Fourth, the president said he would accelerate the environmental review of new offshore areas so that they could be opened to drilling. He also said that there would be annual lease auctions for areas in Alaska. He wants to open more areas to reasonable and responsible drilling. this last section of his plan is just like the first three. It means nothing. Within the last few weeks, we have seen Shell Oil sent back to the drawing board on a drilling permit in Alaska even though the application contained all the needed information and had all the safety and environmental requirements that the government had set. The government just decided to add new requirements many months after the application had been submitted. Let's put this in context. If the Shell permit had been issued, it would have been expected to lead to production of about 250,000 barrels of oil per day. That is more than 1% of the oil used in this country every day. Factor in all of the other permitting delays caused by the Obama policies and you quickly realize that US oil production is now about 10% lower than it otherwise would have been if permits had just been issued as before. All that extra oil production would surely have kept the world price from rising as high as it has. That means a much lower price at the pump for gasoline.
The Obama new energy policy is a sham, a trick designed to convince people that the president is actually doing something to bring down oil prices from an increased that he caused in part. when even the NY Times recognizes the plan for the sham that it is, Obama better go back to the drawing board.
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