Last Monday, Nancy Pelosi appeared on Larry King to promote her new book (see transcript). When the discussion turned to energy policy, she dropped a few doozies. Not only are her talking points wrong, but they even contradict each other. The majority of Americans favor increasing U.S. oil production, and so Ms. Pelosi has to engage in mental gymnastics to cloud the issues.
When King asked her how to bring down the price of oil, Pelosi’s answer was, “We have said to the president, the fastest way to do this is—in 10 days the price can come down if you will free our oil. Over 700 million barrels of oil the president is sitting on of the Strategic Petroleum Reserve. Number one, free our oil.”
Her answer is ironic. Pelosi is opposed to freeing American oil. There are some 700 million barrels in the SPR, it’s true. But there are an estimated 10 billion (with a B) barrels in ANWR alone, 86 billion barrels in the outer continental shelf, and 800 billion barrels in shale oil resources. The United States has physical access to more oil (from all sources) than Saudi Arabia, if only the federal government would free this oil.
Pelosi’s next talking point was also duplicitous: “Number two, they want to drill. If they want to drill, we have a (INAUDIBLE) –68 million acres in the lower 48 that they can drill in that are permitted and all the rest.”
It is amazing that this particular statistic continues to be cited. When oil companies lease acres from the federal government, of course they aren’t going to end up producing from every single acre. The oil companies don’t know exactly where the oil and natural gas deposits are; they have to first lease the land and then explore. With oil over $100 per barrel, do we really think the oil companies are purposely ignoring barrels they could easily pump and sell?
Another irony is that even if it were true that oil companies were deliberately withholding product by sitting on leases, then why not take more of their money? Oil companies right now are champing at the bit to send Congress some of their profits, in exchange for the right to produce more domestic oil. Whether or not they end up drilling, why not take their money and reduce the deficit? Either they drill, and prices go down, or they don’t drill, and we’re in the same boat as we are with the federal prohibitions. Either way, the Treasury still gets the extra money from the new leases. It should be a win-win for Pelosi.
Pelosi’s next point is straightforward enough: “Three, stop the speculation.” The only problem here is that the Commodity Futures Trading Commission’s July report (pdf) showed that there is no evidence that speculators are responsible for record oil prices. If they were, there would be telltale signs such as rising inventory levels, and changes in investor positions preceding changes in futures prices. But the data don’t show any of those patterns.
But Pelosi’s fourth talking point is my favorite: “Four, renew—invest in renewable energy resources, which will bring a faster return than drilling offshore, which will take 10 years and produce two cents reduction in 10 years off the price at the pump.”
Now this point is false—the price reduction would be much more than two cents at the pump—but at least excusable, as there have been (in my opinion) wildly pessimistic analyses put out by the EIA on the impact of ANWR drilling. However, if Pelosi wants to believe the EIA when it says that tapping into a 10 billion barrel deposit, which may ultimately produce an extra million barrels per day, will have such a small impact, then how can she claim that drawing down the SPR will bring relief at the pump?
Nancy Pelosi has backed herself into a corner with her energy analysis. Anxious to show realistic leadership, she has called on tapping into the Strategic Petroleum Reserve, which holds 700 million barrels. Yet she continues to claim that tapping into the hundreds of billions in natural reserves would have little effect on prices, even in the future when that oil is hitting the market. The contradiction speaks for itself.