Hurricane Ike, Gustav, Katrina and Rita Should Be A Lesson In Our Need For Expanded Drilling!

Although oil prices have dropped by nearly 30% since mid-July, those prices are not always reflected in the price of gasoline at the pump. Retail gas prices are driven by refinement costs and production and thus disruptions to refinement, switchover to seasonal fuel blends and routine refinery inspections can influence prices dramatically. This week wholesale gas prices have risen dramatically throughout the Midwest, and that rise is expected to ripple throughout the nation. In Texas, wholesale prices are nearly $5 per gallon, meaning of course retail prices are much higher. As far north as Illinois, Indiana, and Wisconsin the prices of refined oil have risen 25-40 cents with prices at the pump closing back in on $4 per gallon. Why?? Simply because a large portion of our nations production and refinement facilities are under attack by forces that we cannot control.

A majority of our nations domestic oil production comes from a relatively small region along and off the coasts of Louisiana and Texas. As a result, a large majority of our nations imported oil points-of-entry and refining facilities also rest along these coasts. Our nation's restrictions of oil and natural gas drilling have led to a massive bottleneck of energy resources in the northwest corner of the gulf of Mexico. For the fourth time in as many years, those resources are threatened by a large hurricane, shutting down production and driving up retail costs. As a nation we must pursue alternative fuels, but at the same time we must increase our domestic production and protect that production from both human and environmental threats. Imagine if oil prices had not fallen by nearly a third in the past 2 months, how high would retail prices be today?

You can argue that hurricanes only present a temporary disruption in US refinement and production; but then again if a category 5 storm were to hit the region, it could take months or years to recover. Long-term oil supplies would be threatened but more importantly refining would grind to a halt. As a nation, we can import as much oil as other nations will supply, but without refining capacity the oil is useless. We must expand US oil production and build new refineries in those regions, as a result this would also create new ports of entry for imported oil and protect against supply disruptions caused by natural or man-made disasters.

9/11 and Hurricane Katrina provided a valuable lesson to corporate America as to the importance of offsite and multiple location backup of their information technologies and operations. Corporate America has worked dilligently to protect their client services against natural and man-made disasters; and it only makes sense that we would do the same with the life-blood of our nation. Oil provides for much more than our transportation needs, as nearly 40% of our consumption is used for non-transportation manufacturing. A major disruption of supply and refining capacity would ripple through our entire economy with effects that could last for years.

I have long said that it is unlikely that increased US production of oil & natural gas would have an overwhelming impact on prices. After all, when much of the world's oil is controlled by an organization that arbitrarily raises and lowers production based upon their pocketbook, there is only so much we can do. However, increased US production and refining capacity would help bring price stability to the markets and more importantly STABILITY TO DOMESTIC WHOLESALE & RETAIL PRICES. Additionally, increased US production would help control speculation, thus providing more stability, by creating the anticipation of increased global production which would be immediately reflected in oil futures.

For me, the need for expanded oil and natural gas drilling is not as much an issue of prices and consumption, but rather an issue of national security, economic security, and domestic environmental regulation. Our nation should and will pursue alternative energies, but the reality is that it has taken 100 years of investment and labor to create an infrastructure built upon oil. Even if viable alternatives were developed in the next few years, how many years would it take to replace our current infrastructure? Additionally, alternative energy's cannot replace the manufacturing usage of oil in this nation and thus our reliance upon foreign oil would continue. Regardless of who the next President is, the reality is that there are undeniable facts on energy and energy consumption that neither candidate is discussing.

According to the United Nation's the 2 most polluted waterways in the world are the Lake Maracaibo Basin (Venezuela) and the waterways surrounding the Middle East. Yet, these are the regions from which we derive a large portion of our oil production. By importing oil we are relying upon nations with at-best lackadaisical and unenforced environmental regulation. According to the watchdog groups, the United Nations and the Department of Energy, in 1998 more oil was released into Lake Maracaibo, Venezuela than has been spilled by the entirety of land-based and offshore oil drilling, refinement, and transportaion in the US over the past 12 years. Although the Venezuelan government is tight-lipped, global environmental groups accompanied by satellite imagery have confirmed that their environmental record has not improved.

If war were to break out with Iran it would cause major oil exportation disruptions throughout the middle east, causing major supply disruptions throughout the US and the rest of the world. Russia is intent upon domination of European energy supplies and Europe is now under increasing pressure and fear of further disruptions caused by Russian aggression. It only makes sense that our nation protect our oil supplies and production to protect against the effects of an increasing global crisis.

Increased US production would lead to job creation, increased Government revenue and billions of dollars being pumped back into OUR economy; dollars that could be used to help create more jobs and increase efforts to move away from an oil-driven society. As we speak, Saudi Arabia and the U.A.E. are investing billions of dollars into alternative energy sources; billions of dollars that they received from the pocketbooks of our citizens. These nations understand that oil is not an infinite cash cow; thus, they are using our money to develop the energies of the future, maintain our dependence upon their energy resources and dominate the global economies.

Ike, Gustav, Rita and Katrina should send a clear message to our government that we must protect our nations energy supplies by expanding our nations energy production, refinement locations and ports-of-entry. We cannot afford to continue to rely upon foreign oil while endangering what little domestic energy production we have.

J Brown
September 12th, 2008
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