My colleague Omnia21 had a good write-up of Day 1 of the Senate Judiciary Committee on rising oil prices. Sounds like the oil company execs are fighting back. From Omnia21:
Once again Congress hauled energy company executives before them to blame them for high prices for gasoline and other fuels. As usual, they were attacked. Senator Richard Durbin, Democrat of Illinois, set the tone:
"You have to sense what you're doing to us - we're on the precipice here, about to fall into recession. Does it trouble any one of you - the costs you're imposing on families, on small businesses, on truckers?"
The “costs you’re imposing” charge said it all. For once, the oil executives firmly but clearly told Congress that in large part it was to blame. The problem is too much world demand and U.S. law and regulations have constricted supply, thus placing pricing power in the hands of Middle East nations, Russia and Venezuela. There are hundreds of billions of barrels of oil in deep water off both the east and west coasts, off the west coast of Florida and in the Rocky Mountains, to say nothing of ANWR, in which oil companies are prevented from exploring and drilling.
"We cannot change the world market," said Robert Malone, chairman and president of BP America Inc. "Today's high prices are linked to the failure both here and abroad to increase supplies, renewables and conservation."
Malone's remarks were echoed by John Hofmeister, president of Shell. "The fundamental laws of supply and demand are at work," said Hofmeister. The market is squeezed by exporting nations managing demand for their own interest and other nations subsidizing prices to encourage economic growth, he said.
OPEC nations want as much money from the West as they can get, so they are not anxious to increase supply, just enough to keep us from getting really angry. So trillions of dollars are pouring into those countries that could have been put to good use in this country, exploring for domestic sources of energy and sending kids to college. (And we uneasily wonder what all that money is being used for.) At the other end of the spectrum, on the demand end, countries such as China are subsidizing prices for businesses and consumers so that their economic growth will continue.
So it’s not a free market on the OPEC supply end and subsidies distort demand. Add to those inhibitions the fact that, as Hofmeister of Shell said, “access to resources in the United States has been limited for the past 30 years. "I agree, it's not a free market."
American citizens are now paying the price for relying on the rest of the world to drill for oil. The situation would a lot different if for the past 30 years the U.S. had been working to make itself independent of oil from hostile and unstable parts of the world. Major oil spills close to the U.S. have been the result of oil spills from tankers, not from drilling. What is more important, national energy security or nice views for shoreside homes? Brazil is drilling off about 100 miles or so off its coast, as would be the case in most of the continental shelf off the U.S., and has come up with two major discoveries in the past year which will make the country a significant oil exporter. It’s already independent of foreign oil because of its own oil production and decades-old production of ethanol from sugar cane.
The executives made it clear that large parts of the U.S. that are currently closed to drilling - like sections of Alaska, the Rocky Mountains and the continental shelf - should be opened. "The place to start the free market is in our own country" said one executive. "[The drilling ban] sets the stage for OPEC to do what we are doing in our own country, and that is effectively limiting supplies." Republican lawmakers have repeatedly tried to open up these areas without success because of Democratic opposition. If Congress were to finally act now, it still would be years before oil would flow. Even so, such an action by Congress would have an immediate effect on suppliers and supply, because they would realize the road to a free world market in oil would be opening.
The executive vp of Conoco Phillips John Lowe advanced some novel (sic) ideas for Congress to consider in addition to lifting the ban on drilling, like how about adopting a balanced energy policy? Do more to encourage alternative energy sources (offshore wind farms, for example), promote energy conservation, cut regulations that are preventing the construction of refineries -- and, oh yes, remove the tariff on ethanol. Congress slapped a 54 cents-per-gallon tariff on imported ethanol, thus blocking the import of low price ethanol from Brazil that would help lower gas prices for America’s beleaguered drivers. Dropping the tariff is one action that could provide some near-term relief.
To end this courageous presentation by the energy companies, ConocoPhillips’ Lowe calmly concluded, "U.S. oil companies should be viewed not as scapegoats, but as assets. We must work together to find a real solution."
Will Congress respond in the interests of the American people?