So John McCain and President Bush have both come out in favor of drilling for more oil here in the U.S. — either in the Alaska National Wildlife Reserve (ANWR) or offshore drilling or both. I’m curious about something though. Just because we get a barrel of oil from U.S. shores…how does that translate to cheaper oil? Last I checked it was a free market. Even if we could add to the overall production of oil in the world it doesn’t mean that the barrel of oil pulled out of the ground from U.S. reserves would drive overall prices down. The oil would go out on the open market and be subject to the same speculation and pricing pressures as oil from Nigeria, Saudi Arabia, Kuwait and elsewhere.

Is there an underlying assumption that the oil would be reserved for “U.S. use only” In effect, we would simply become another oil-producing nation — the only question is, what volume of oil could we flood the market (if we could flood the market) with in order to push the supply up sufficiently so that it outstrips demand and the prices come down. Also, the underlying assumption is that the drilling will flood the market in short fashion. The fact remains that it will take time for the oil to make it to the market and it is quite possible that the demand, during that time, will grow such that the amount of oil hitting the market from the U.S. supplies will not make any great impact (although perhaps it may…who knows. That’s the problem with predictions of the future — you never know what could happen).

The issue with the price of oil is not just a supply and demand one but includes the value of the dollar (since oil is priced in dollars) as well as other factors (from some estimates up to $50 of the built in price of oil right now may well be due to the action of speculators).

I cannot see Congress (or this administration) passing legislation that would open up ANWR or the U.S. coastline to off-shore drilling where the bill includes a provision that states something like “oil derived from these sources may only be sold in the territory of the United States.” That goes against the concept of a free market and even if there were such a clause why would the oil companies agree to sell the oil at a lower price than what’s available in the open market?

I’m not saying that drilling in the U.S. would not help…it might. The only question remains is, and again, I’m no expert in these matters, how drilling in the U.S. would impact the macro-economic model of the world oil markets. It may not impact it at all. When I hear politicians stand up and claim how drilling in the U.S. territorial waters (or beyond the territorial waters of the U.S.) or in ANWR will ease our pain at the pump by bringing domestic oil to the U.S. I take such claims with a large grain of salt. Remember…they’re saying the things that they know their constituents WANT to hear so that they’ll be re-elected at the next election.

I think that America, and pretty much the rest of the world at some point, needs to face the fact that oil is a dwindling natural resource and we need to look forward towards the future to a world without oil…or where oil has a vastly reduced role. This will be painful, yes, but it can be done. Brazil has done it with ethanol from sugar cane (which I have recently read about and I’m pretty impressed) and we can do it as well — whether it’s from solar, wind, biofuels or a mixture of all three.

Looking forward to an uncertain future is scary… it’s much easier to look back at what you know rather than forward into the unknown. However, it’s that forward vision that has made this country great and we need to be leaders in this effort if we are ever to break the stranglehold that OPEC has on us.