Tuesday, July 15, 2008

Color Me Purple - Oil

Quick Quiz/2-Part Question: What disaster happened in November, 20, 1980, that almost sucked away an entire lake within hours of it happening... and what tiny engineering error is believed to be the cause of the disaster? (See video below for the answer.)

This is the second in a series of "Color Me Purple" posts that I will be writing leading up to the November 2008 elections.

Energy - Part 2: To Drill for Oil ...or Not?

The whole oil thing kind of reminds me of a Shakespearean drama... "To be or not to be. That is the question..."

I sincerely doubt that any single one of us knows the whole back story and behind the scenes deals that have taken place -- and HUGE deals probably taking place at this very minute -- on the subject of oil.

The brief little news soundbites that we hear throughout the day mostly revolve around pain at the pumps. Regarding the big picture, few (if any) of those newscasts have been covering stories like these:
Supply On Demand -- This is an interesting short article about the backdoor deals being made direct with drilling companies that are taking oil (and other commodities) out of the global marketplace. Could this be a large part of that "shortage" refrain we keep hearing about? In other words, is demand outstripping supply mainly because more and more of that supply is no longer reaching the market -- even though it is still there?

The Whole Afghanistan/Iraq/Pakistan/Iran Thing -- Another interesting article that refers to the huge TAPI 1,680 km long pipeline project that will... "...export gas and, later, oil from the Caspian Basin to Pakistan’s coast where tankers will transport it to the west." Rather than tell you about the bizarre deals struck on this one, you're better off reading it for yourself here.

Oil and gas deals benefit from rising commodity prices - yet another type of "deal" that has proved to be lucrative for some, thanks to rising gas and oil prices. This is a side to the industry we seldom hear much about.

Drilling Rig Shortage - Is it an oil shortage, or a drilling equipment shortage? Even as Bush lifts the Federal ban on drilling, what good will it do when "the world’s existing drill-ships are booked solid for the next five years" as reported in this New York Times article.
Demand is so high that shipbuilders, the biggest of whom are in Asia, have raised prices since last year by as much as $100 million a vessel to about half a billion dollars.
Even though the report came on June 18, 2008... the story is not new. StockIndicator wrote about the drilling equipment (and experienced labor shortage) problem two years ago, back in 2006, stating,
"During the course of our three-month investigation, we found the labor and equipment shortage applied not only to uranium but also to coal, oil and gas, coal bed methane and precious metals exploration. ...For investors, the labor and drill rig shortage has a silver lining. As inventories dwindle lower, commodity prices will continue rising."
Well, we all know today how accurate that particular prediction became.

With all the far left and far right jibber-jabber on the oil topic, it's oh-so-difficult to wade through the hype and get to the real facts. Is it speculators jacking up the price? Is it dropping supply or just supply not reaching the marketplace? Is it really increase in demand... to the point that they truly don't believe ANY alternatives will exist by the 2012 or 2015 mark when new wells are expected to start producing? Is it groups who want to capitalize on current high prices to line their own pockets and take advantage of the perceived panic being stirred up on the issue?

I don't have the answers to any of those questions. And sadly, I doubt if I would believe the answers unless they came with irrefutable evidence -- proof that the answers I get are actually the truth.

And so, with respect to the question...

Should we open up drilling rights?

In short, if it's "PROVEN" beyond a shadow of a doubt that drilling needs to open up in areas previously banned, then I sincerely believe STRONG, IRREVOCABLE PRECONDITIONS need to be set.

CONDITION #1: Zero export condition. In other words... absolutely NONE -- and I mean ZERO -- of any oil produced from wells located in those previously banned areas can be exported in any way, shape, derivative, form, etc. Absolutely 100% of all oil and/or gas and/or other minerals would have to be sold exclusively within the U.S.A. and with the condition attached that it never leave our borders -- even after refining and/or being converted into other products (such as cooking oil, plastics, etc.).

Not a single drop goes off our shores -- period.

Furthermore, severe penalties need to be put in place -- right up front -- to ensure not a drop from these protected areas goes into the global pool.

Sounds pretty nuts, right? Maybe at first glance...

Take another look at the condition and, if the oil produced from those previously banned drilling areas couldn't be used in any way shape or form for export, how quickly do you see this condition having a positive impact on energy (even food) prices here at home? Makes me curious if it would have an impact.

Hmmmm... makes you kind of wonder how many of those companies eager to start drilling will still be in the picture if this condition were attached to the rights, doesn't it?

I'm guessing even fewer of them would stick around for this next condition...

CONDITION #2: 100% Accountability. I'm sick to death of hearing how the industry has improved and how they can do things today with little to no impact on the environment.

Therefore, I say, if they are that confident, they should be able to put up substantial performance bonds in trust and remain fully 100% accountable straight through 50 years AFTER they have ceased operations, dismantled their rigs/facilities and gone away -- LEAVING NO TRACE BEHIND. The bonds would be held in trust until that 50-year dormancy period has expired.

AND if, God forbid, anything should happen... the company has to pay for it out of their own pockets -- not the taxpayers' pockets -- and not through the performance bonds. No "name the blame campaigns" or "fingerpointing" or whatever -- just fess up and pay up. Also, if something bad does happen -- they lose their bonds. The bonds go to the taxpayers. If nothing bad happens -- the companies get their bonds back after the 50-year dormancy period mentioned above.

The above is a simplified approach. I'm sure the legal eagles can hammer out the full details of how it works to protect both environment and taxpayers while at the same time, hold companies fully accountable.

Now why, oh why, would such strong zero tolerance requirements need to be in place? Well, take a look at this video to see what can go wrong from one simple mistake. It's the answer to the QUIZ above, about the Louisiana sink hole that drained an entire lake.

Here's how one small mistake can have disastrous consequences:

CONDITION #3: Shorten "Rights" Time - They don't get 25 years. They don't get 15... They don't even get 10 years. Let's give 5 MAX and a penalty if they don't do anything at all. No sitting on the rights until the climate changes or the attached conditions can be changed by bribing (oops, did I say that?) a future administration... or whatever. Use it - or REALLY lose it - period. Once you've lost it, you can't ever bid on it again. You had your chance.

Now you might think, with the above three conditions (there are more, but those will do for now) that I'm against drilling.

Not entirely. I'm just thinking most of it is too little, too late.

With that said, I am against drilling if it's intended to line pockets of companies who think more about profits, less about this country, and least of all about the taxpayers who've had to help clean up a mess or two before. Do it right, or don't do it at all.

And do it for the reasons you "say" you want to do it, and not for some hidden agenda because maybe you've made a few backdoor deals that have supposedly caused demand to outstrip supply in recent years. Do it right AND do it for us, or don't do it at all. 'Nuff said.

So, this undecided voter has given her P.O.V. on the subject of drilling for oil.

Candidates -- don't give me the big spin on "if you're for or against it." Instead, tell me, (1) if we really have to do it first, and if so... (2) what conditions would you attach? And, for the record, (3) if we really don't have to drill, will you tell me the truth and not let them drill?

Bottom line is, what really say you?

Sidenote: For the record, I'm ALL FOR SUSTAINABLE energy solutions that do NOT require fossil fuels, particularly with respect to transportation.

As a mechanic's daughter, a retired mechanic who once owned a fairly successful company specializing in hydraulic repairs, I honestly believe there just HAS to be a better way to turn and stop a wheel. Surely the combustion engine has had it's day in the sun long enough. Surely there is a better, cleaner and safer way. I just can't believe that it still takes that many parts to ...as I said... turn and stop a wheel. Take the need for transportation fuels out of the demand loop and we'll probably see a MASSIVE difference in demand -- and price.

Necessity is the mother of invention. Today's high oil prices may bring out some of the best inventions we've ever seen to date. Wouldn't that be nice? If demand suddenly fell off a cliff, then what would happen to price?

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