02 July 2008

Schwarzenegger on Off-Shore Drilling

...anyone who tells you this would bring down gas prices any time soon is blowing smoke.

Drill More is a petition started by Newt Gingrich in May, and is gaining steam.


WestEnder said...

I saw the Newtster in D.C. back when he was Speaker. He was tossing snowballs with the woman he left his wife for after she was diagnosed with cancer.

The girlfriend took a picture of me and the Newt but she had trouble focusing the camera, kind of like how Newt has trouble focusing on actual solutions to real problems.

Jimmy_James said...

"...anyone who tells you this would bring down gas prices any time soon is blowing smoke."

Possible. But there are those who believe that oil prices are being artificially inflated because of speculation on the commodities market. Companies that depend on a potentially volatile commodity (like oil) essentially hire someone who assumes "risk" by contracting for that commodity several years out. They pay a little more for the commodity now, but with the knowledge that if it skyrockets in the near future, they'll have time for the market to settle down or for the company to take other measures before they're paying high prices. What it means in layman's terms is that some companies are cushioned from the spikes we are seeing right now, which is why SouthWest has done so well over the last 5 years.

So why do people blame the speculators? The argument is that turmoil in the mideast is causing them to bet that oil will continue to rise, which is a self-fulfilling prophecy, sending the price of oil through the roof continually. So would drilling help us? Who knows? If it sends a message to the speculators that the United States is willing to drill its own oil, it could be a light at the end of the tunnel that causes them to believe that the price of oil will drop in the next then years, resulting in speculators "betting down" instead of up.

IF the people who suspect rampant speculation are correct (and that's a BIG if), then the US announcing relaxed drilling restrictions might actually lower the price of oil. In that scenario, it's not the actual drilling and pumping that is important, it's the promise of future oil from untapped reserves that are not controlled by a hostile nation that will bring down the price.

Personally, I don't mind high oil prices. It means increased urban renewal, decreased sprawl, and hopefully a resurgence of rail in this country. But I don't think that Schwarzenegger is necessarily correct about the effects of increased drilling or the motives of those advocating for it.