First, I love the side blog. Bush singing the national anthem in spanish. I love it!

I’ll take a stab at your question. I generally resent the welfare for oil companies, and how they have used their economic and political advantages to squish competition
“Clearly there’s no shortage of money for oil exploration”.

But exploration is getting more and more and more and more expensive, as non opec oil gets closer to peaking (or has already peaked)

As a quick side, I find it amusing that, generally defenders of the oil companies point to their high exploration costs as an excuse for their profits, but these same defenders make fun of peak oil people . . . some how they dont make the connection between rising extraction costs and the availability of the stuff.

So because all of this the domestic majors are in a fight for their lives (in the coming years they are going to be losing more and more market share).

They are this country’s biggest dogs in the world energy market, if they die on the vine, it would be the death of another critical American industry–like steel, textiles, go on down the list.

The majors will be critical in some of the bridge fuels, like synthetic-gasoline made from natural gas, they are also getting into power generation through ng, so conceivably they could make head way on the renewables (like BP).

You know, they also own all this infrastructure . . . So we need to some how protect them, steer them into renewables and encourage competition against them.

hmmmmmm . . . . thats hard.

Posted by Jon Sheridan on 2 May 2006 @ 2pm

I agree, there is no need for it. If any other business wanted to expand, could they get the government to pay for it?

If a a record company, like WEA, wanted to find new talent should the government subsidize it? If McDonalds wants to test market a new burger do they get a tax break?

I know that gas ad oil are vital to our nation and that the government wants to promote its production to some degree but there should be a limit. If the companies have the money, make them pay for themselves.

The only problem I could see is cost-passing. If the oil companies stop getting federal funds, will the price of gas sky rocket? If we are funding the oil companies to keep the price down, then we should just call it that, price control, and be done with it.

Posted by Art Kenney on 3 May 2006 @ 7am

Thats the problem, I do not know if they could pass the price, because the oil is a globally traded commodity, and they are in direct competition against OPEC countries, who have way more reserves and much much cheaper production costs.

Did you know that Both Venezuela and Saudi Arabi both sell gas directly in the country? Al those generic gas stations with a little bit less expensive gas: thats them.

That being said we have, since ‘00, we have given Exxon and friend’s a ton more tax breaks/credits, and subsides . . . there is protecting your domestic industries and then their is giving the store away . . . I don’t know this stuff is crazy.

Posted by Jon Sheridan on 3 May 2006 @ 8am

It depends on your definition of “welfare.” Our environmental policies make it more expensive to produce a barrel of oil here than in Nigeria, for example. Without an “incentive” (usually a tax break for producing US oil), companies will correctly opt to spend what capital they have on the less expensive resource.

If domestic security is important for us, and we do not want to weaken our environmental policies, then we are faced with the need to reduce the cost to drill in the US through other ways.

I do not believe our environmental policies are wrong. They just have a cost.

Also, many of the “subsidies” are for ethanol, producing from nonconventional sources, and spending on R&D to develop new technologies. Some of the new technologies have resulted in lower costs to develop oil resources. In a sense, you could argue our prices would be higher but for them.

There is no free lunch. Congress has made the policy decision to subsidize these activities to make gasoline more affordable. $3 gas doesn’t sound affordable, but neither you nor I have the data to argue that those subsidies haven’t helped, either.

Posted by Curious on 3 May 2006 @ 9am

It is not our environmental policies that make it more expensive. Granted they might add pennies . . .

But what we are talk about here is a fundamental: places like Saudi Arabia the oil is plentiful: you poke a hole in the ground and the oil comes out. You catch it will buckets, whatever you want to do, it is just ridiculously cheap to produce.

Here, in the US all that oil was used up by 1972. Now we have to go into the Arctic, and deep sea explorations (just one of those deep sea oil rigs can cost upwards of 100-150 million dollars), or use fancy (expensive) drill rigs to try to squeeze more oil out of exhausted fields. Thats why it is more expensive.

Plus all those off-shore rigs are subject to being destroyed by big storms (insurance costs anyone?)

Regardless of all of that: my understanding is that all the lions share of environmental regulations are at the refinery end. It all gets refined stateside, regardless of where it comes from.

Posted by Jon Sheridan on 3 May 2006 @ 12pm