Another Big Win for Big Oil (Let’s Make it the Last)

Photo: White House Archives

They are today the most profitable corporations in world history. The political power garnered by all of this wealth was firmly on display last week when Congress handed Big Oil two big wins–the lifting of the Congressional moratoriums on offshore drilling and the development of oil from shale.

Oil and energy are emerging as two of the most critical issues of the 2008 election. As the debate moves forward on just how much the American public should sacrifice in Big Oil’s name, we must first assess what “Drill here, drill now” actually gets us.

Lifting the moratoriums made Big Oil happy in an election year and increased its access to oil. In return, the American public is, however, no closer to “energy security,” lower gasoline prices, or a future less darkened by global warming.

Promises of increased U.S. energy security are not supported by the facts. The U.S. already pumps enormous quantities of oil. In fact, while it has only the 11th largest oil reserves in the world, the U.S. is the world’s third largest daily oil producer, at some 6.8 million barrels of oil a day. Only Saudi Arabia and Russia produce more oil per day. The companies that pump the most oil in the U.S. are, in order, BP (based in London), ConocoPhillips, Chevron, ExxonMobil, Shell (based in The Hague), and Occidental. These are global companies that sell to the highest bidder and increasingly those bidders are found outside of the United States.

Since 2006, U.S. exports of oil and petroleum products have been on the rise, and are today at record levels. During the first four months of this year, a record 1.6 million barrels a day in U.S. refined petroleum products were exported, up 33% from the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time in at least the last fifteen years.

Thus, unless we ban exports, increased U.S. oil production in no way guarantees increased domestic U.S. oil or gasoline “security.”

Increased domestic production will also likely mean nothing in terms of reducing U.S. gasoline prices for one simple reason: the price of gasoline in the U.S. has risen at the same time as have U.S. oil stocks–the amount of crude sitting in U.S. storage facilities. These stocks rose from 285,000 barrels in 2000 to 319,000 barrels in mid-2008 before prices started to dip. Thus, while overall the supply of crude available in the U.S. increased from 2000 to 2008, the price of gasoline increased as well.

While the supplies of crude in the U.S. increased, the amount of gasoline declined precipitously. From a high of 161,000 barrels in 2001 and 2002, the gasoline supply declined to 105,000 barrels in mid-2008. In other words, while more oil was available, our oil companies–six of which (ExxonMobil, Chevron, ConocoPhillips, BP, Shell, and Valero) control almost 60% of the U.S. refining market (nearly twice as much as the six largest companies controlled just twelve years ago)–simply chose to refine less of it into gasoline.

Thus, taking on Big Oil’s vertical integration, over-concentration, and price manipulation would go much further toward addressing gasoline price increases than would raising U.S. oil production.

Meanwhile, both offshore oil drilling and oil shale development come at great cost, among them drilling in water depths greater than 500 feet releases methane, a green house gas at least twenty times more potent than carbon dioxide in its contribution to global warming. Until recently, most offshore drilling took place at depths of 30 to 200 feet of water. But in the last ten years, the number of rigs drilling in depths of greater than 1,000 and even 5,000 feet has catapulted, and with it, the release of these climate-changing toxins. Producing oil from shale is also enormously energy intensive and far more polluting and global warming intensive than even conventional oil development.

Then there is the financial cost. Each offshore oil well costs approximately $120 million to drill. Some 80% of these wells in the Gulf turn out to be dry holes containing absolutely no oil whatsoever. In 2006, Chevron purchased the most expensive offshore drilling rig in history for $600 million–twice as much money as the company spent on all its green alternative energy investments for the entire year.

The oil industry is today simultaneously awash in cash and desperate for any oil it can lay claim to. It will pay any price to get every last drop on the planet.

One way to help ensure that our elected officials do not allow Big Oil to take us down this particularly Machiavellian path is to follow Oil Change International’s ( call for the “Separation of Oil and State” and the renunciation of all oil industry money from those candidates seeking political office. We can also all personally commit to voting for only the “least oily” candidates.