Comments on: Offshore Drilling: Yay or Nay?

By: JStandish

JStandish — Sun, 29 Jun 2008 16:38:31 +0000

The argument for resuming offshore drilling in the United States is totally misleading. Roughly three-quarters of the 90 million-plus acres of federal land being leased by the oil companies onshore and off are not being used to produce energy. That is 68 million acres altogether, among them potentially highly production leases in the Gulf of Mexico and Alaska. These leases should be exploited before the oil companies are allowed to get any more. Both McCain and the administration have not been honest with the American people. There are suspicions that the oil industry’s main objective is to stockpile millions of additional acres of public land before the Bush administration leaves town.

By: Mark

Mark — Tue, 24 Jun 2008 02:12:39 +0000

Jacques, you raise an interesting point re: property rights, but that’s not quite what I mean. My whole point, and one which it appears Peter and I are going to have to agree to disagree on, is that it’s incredible to me to suggest that conservatives are ‘abandoning the free market’, as our friend Peter suggested, by coming out in favor of offshore drilling, when a more convincing case could be made that the ban on offshore drilling was ‘abandoning the free market’ (i.e., placing certain reserves outside of the normal forces of supply and demand by declaring by government fiat that the supply in these locations would, by necessity, be zero)…

However, in response to your post specifically, yes, if the government owns the drilling rights, it is free to dispose of them as it chooses…it was not my choice to frame this issue in terms of the ‘free market’, I was merely responding to someone else’s decision to do so…as you say, the more proper way of framing the issue is, to me, whether continuing the ban is good or bad policy…

By: Jacques Distler

Jacques Distler — Mon, 23 Jun 2008 23:04:54 +0000

Excuse me for butting in, but I can’t resist asking, “Who has property rights to drill for oil in ANWR, or off the coast of California?”

By “interfering with the free market,” I assume you mean that the big, bad Government is preventing those, with said property rights, from exercising their rights and drilling for oil.

On the other hand, if the owner (as it happens, the Federal Government) decides not to sell drilling rights to a 3rd party, I don’t see how that can be construed as “interfering with the free market.”

It may be good public policy, it may be bad public policy, but “interfering with the free market?” Hardly.

By: peter

peter — Mon, 23 Jun 2008 22:37:33 +0000

I think we are going in circles here. It seems to me that if the government takes an action for the sole purpose of lowering the price of a commodity, by definition it is not letting the free market do its thing. Whether it is limiting or expanding drilling rights to influence the price of oil, imposing tariffs to keep out foreign goods, or raising corn prices by subsidizing ethanol, the government is taking an active role in manipulating the markets, rather than the passive role of free market economics.

Nor is it Orwellian: when the ban was put into place, it may have had the incidental effect of raising the cost of oil (or not: there was a lot more oil then, and it was a lot cheaper), but it was put into place for reasons entirely unrelated to the price of the commodity. The proposed action now is done for no other reason except to lower the commodity price. I’ve never taken an Economics course – and I don’t claim any expertise in free market economics (although my college roommate married Arthur Laffer’s daughter, of the eponymous Laffer Curve) – but I don’t see how an act designed to manipulate the price of commodities is consonant with free market economics.

By: Mark

Mark — Mon, 23 Jun 2008 22:11:42 +0000

And yes, if the government said you can’t drill under the Washington monument, it would be restricting the market – by definition. Now of course, we would all agree with restriction in that case…and no one is arguing for complete laissez faire, here…but you are the one accusing conservatives of betraying the free market, so you brought it into the debate, and your reasoning is frankly bizarre…

By: Mark

Mark — Mon, 23 Jun 2008 22:09:41 +0000

Look, any way you slice it, the free market position would be one free of government interference. To say the government would be interfering in the market by removing a government-imposed ban that artificially lowers the supply of oil is the textbook example of an Orwellian argument, as too many steves pointed out…

If I ban the import of Chinese medicine because I think it is unsafe, then remove that ban, you would accuse me of betraying free market principles? Because there is no difference between the two situations, in terms of supply and demand…

By: peter

peter — Mon, 23 Jun 2008 21:15:00 +0000

The logical extension of your argument is that if drillers want to look for oil under the Washington Monument and the government doesn’t allow them to, then it is therefore restricting the market. That’s all I’m saying.

I don’t think it is necessarily wrong for the government to interfere in the markets. I tend to agree with Thomas Friedman, who wrote in last Saturday’s Times that the government ought to set a floor of $4.50 per gallon as a means to reduce our use of oil. It can be made revenue neutral through tax credits or rebates. While I think that the government should set a very high bar before getting involved in trying to force commodity prices one way or the other, in my view the economic, environmental, and geo-political benefits of a reduction in the use of foreign oil meets this bar handily.

By: too many steves

too many steves — Mon, 23 Jun 2008 16:35:48 +0000

The ban interferes with the market for oil by limiting, even in a small way, the supply. Whether that was intended or not is irrelevant. Much of the oil available in these restricted areas is costly to acquire. The recent spike in oil prices makes this harder to get oil more cost-effective, relatively speaking, that it was previously. Free market economics occurs when supply and demand are allowed to reach equilibrium through, typically, pricing mechanisms. If the government restricts one or the other, no matter how noble the intentions, the market isn’t “free”. That’s all I’m saying.

By: Peter

Peter — Mon, 23 Jun 2008 13:03:45 +0000

The ban on offshore drilling was not established to interfere with the market or artificially raise the price of oil. It was enacted from the belief that protecting the environment (as well as beachfront property and the tourism isndustry) outweighed the benefit of more domestically produced oil.

The government is now proposing to alter the status quo for no other reason than to lower the cost of oil. I don’t see how you can view this as free market economics. It is the intentional manipulation of commodity prices to ameliorate public unhappiness with paying $4 a gallon for gas (almost $5 here in California).

By: too many steves

too many steves — Mon, 23 Jun 2008 11:12:18 +0000

Rather Orwellian I would say: perpetuating a government’s interference in the market is now a capitalist free-market principle? Why do you insist on rewarding the oil barons by restricting the supply of oil?