I don't normally post columns completely, but this was so important an article that I wanted to be sure that it was read in its entirity. The site for this is here(The highlights are mine)"A Bipartisan Fix for the Oil Crisis
By
JOSEPH PETROWSKIJuly 10, 2008; Page A15
As president of Gulf Oil, New England's largest
independent petroleum company, and as someone who has spent his life in
and around energy markets, I find the tone and substance of the current
debate about our energy policy to be profoundly disappointing.
Partisan sides are using a serious crisis to advance
political agendas, create political attack sound bites, and launch
hearings to "expose" the culprit. Pick your favorite: speculators, Big
Oil, environmentalists, China, India, etc.
This is not leadership.
A fundamental misunderstanding of how markets work,
and how an effective government can support the private sector, is
delaying remedies that will bring down energy prices now. These
remedies are to be found in both supply and demand – and both Democrats
and Republicans need to demonstrate their command of this fact. Energy
is too important a cornerstone of domestic prosperity and international
stability to be used as a debating prop.
To Democrats:
Supply must be increased, and that will require more drilling.
We can responsibly drill. The technology to
find, drill and recover oil has evolved tremendously, and careless
drillers will fear tort lawyers more than government regulators. The
claim that the oil companies are sitting on leases and not drilling
defies all logic. With oil at $135 per barrel and drilling rigs renting
at $300,000 per day, there are no idle rigs anywhere. Furthermore,
economic decline – and war induced by basic resource struggles – are
greater threats to the environment and American workers than drilling.
Your claim that any oil we drill for now will not come
on line for five years or longer – and will thus have no effect on
prices today – is incorrect. Unlike past oil crises, where the spot
price of oil (that is, today's price) rose more than forward prices,
the oil price for delivery in 2012 is trading at $138 per barrel. The
market is sending a clear price signal that our problem is in the
future – because we do not have the will to curb demand or increase
supply.
How many houses would someone invest in if there were
a future guarantee that the price would not decline? It is anticipation
of ever-increasing prices that fuels the mania.
The oil market, however, has more than anticipation;
it has a well-defined forward price signal. This is a key component of
the added $25-$40 per barrel in current oil prices. Congressional
hearings and "make it go away" legislation will not stop that.
Demonstrate the national will to address the supply and demand issues
now and it will.
As forward prices decline, watch how quickly the spot price comes down.
To Republicans:
Efficiency is a huge source of new energy. It is
scandalous that we have let the mileage standards decrease over the
past 25 years. Whether through mandates or tax policy, active
government intervention is needed. Republicans have to stop acting as
if the "market" is some pristine state of nature that is not subject to
active shaping.
The latest farm bill, ethanol and sugar tariffs, the
cost of the Iraq war and Bear Stearns all make that reasoning ring
hollow. So when some "free marketeers" attack annual biofuel subsidies
of $4 billion, fleet mandates, or government research and development
expenditures, it is hard not to view this criticism as at best naïveté,
and at worst hypocrisy.
Finally, can we stop with the nonsensical talk of
"energy independence," the end of petroleum, and postured, ineffectual
boycotts of Exxon Mobil? We cannot, should not and will not be
independent in a global economy, and petroleum is not going to
disappear.
A more accurate metaphor is the global energy market
as a giant bath tub where more withdrawals (Chinese and Indian) are
being made every day. The only consistent new supply to that tub is
coming from periodically unstable and unfriendly places (Nigeria,
Russia, Iran, Venezuela).
Our national interest is to add more energy, use it
more efficiently, and diversify its source and type. This will serve to
lessen the power of any one choke point (geography, nation or source).
Using market mechanisms and the private sector (admit
it, Democrats) alongside an engaged, effective and focused government
(admit it, Republicans), true leaders can solve this crisis decisively.
Mr. Petrowski is president of Gulf Oil.
