Senator John McCain has stirred some new trouble with Senator Barack Obama, regarding lifting the 1981 Congressional ban on Off Shore drilling. McCain wisely opined that opening up new reserves to oil, even though it would likely take a few years before it can be pumped into your car,  will have a “psychological impact that I think is beneficial”. Obama’s swift response to an economic truth was to disavow McCain’s stance as “Washington- Speak for it Polls well” claiming expanding our reserves will have no real impact.

However just a vague understanding in economics could makes McCain wise and Obama ignorant. The Associated Press reports that there is an estimated 18 Billion Barrels of oil in which could be extracted. While the annual production of that source will still be pitons compared to United States Annual 6 billion barrel a year thirst (which is predicted to double by 2025) it is certainly much more than the 700M in the strategic reserves Democrats are demanding to be released to the public.

If McCain’s Plan is implemented it would be beneficial in two “psychological” but beneficial ways:

First, it would send a message to OPEC which controls two thirds of the oil reserves, but only about one third of the oil production, along with other large oil producing nations, that if they fail to release more oil or reduce the oppression in which they inflict on their people, we will get it closer to home. Thus, America would send them a stern warning that the “consumer” will shop somewhere else! Furthermore, many nations, which are oil producers and not ran by brutal dictators or oppressive clowns such as in Venezuela, would rather produce more oil at a cheaper price instead of loosing business entirely. America would do what is has neglected for a long time to do, and that is take action against the dependency we are in rather than just talk about it.

Second, it would deflate the current price of oil that seem to rise every day. As with most of economics, oil is no exception to the law of supply and demand: The more available or to become available the cheaper the price. Moreover, the falsely accused “evil oil spectators” would not predict such grim futures on oil if it is actually being extracted rather than locked uselessly in the ground. Lower futures will help stem the rampant fear of $200 oil by the end of summer. Fear is indeed psychological and affects how we behave, but much of economics is rooted in behavior making “psychological impacts” much more than just “Washington- Speak”.

There is no doubt that an increase in oil production will not be the cure-all for our energy crunch, but reverting to cold showers, candles and Priuses are no the panacea ether. The proper innovation will need time and people should not suffer with such high gas prices. Few Vegetarians would choice to starve with a cheeseburger next to them; the American people should not be forced starve because Democrats refuse to drill for oil at home.

Source: Energy.gov

Source: Associated Press

Tags: Exploration,Obama,Oil
Categories: Rants & Opinions