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Analysis: Offshore drilling realities

By MARTIN SIEFF

WASHINGTON, July 18 (UPI) -- President George W. Bush's decision to lift the ban on offshore oil drilling around the United States has a lot more merit than environmental groups and his Democratic opponents claim, but it is unlikely to last long beyond January, whoever wins the U.S. presidential election.

Oil prices fell Thursday to close at $129.29 per barrel on the New York market, the lowest closing price since June 5. The $5.31, or 4 percent, drop came despite pipeline pressure problems in Nigeria that caused a temporary suspension in 47,000 barrels of oil exports from that source, the Oil Voice Web site reported.

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The most immediate reason the price fell may well have been the anticipation of Bush's decision to lift the ban on offshore drilling and on drilling in the Arctic National Wildlife Refuge.

Critics claim that lifting the offshore drilling ban will not produce remotely enough oil to affect global oil prices and that it will take many years before any new-found oil comes online anyway: The usual time lag before new oil supplies would significantly come on line is usually put by the critics at seven years.

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In fact, such claims are wild guesstimates, and the people who make them, and who simultaneously call for a "crash program" or "New Manhattan Project" in alternative energy development, never note that the new energy initiatives they call for will likely take vastly longer than seven years to have any positive effect at all, if they ever do.

That is because it is always far quicker and more reliable to expand or develop existing mature technologies than to wildly gamble that some entirely new technology, like highly inflammable hydrogen fuel for cars or biomass, can be conjured out of nowhere in less than a decade.

Historically, the transformation from wood to coal burning, and then from coal to oil, as primary sources of U.S. domestic energy were processes that each took a half-century.

The casual throwing around of the term "Manhattan Project" is a case in point: More than six decades after the World War II Manhattan Project first successfully created an atomic bomb, the civilian use of nuclear fusion to generate cheap electricity remains a science fiction pipe-dream. And Wall Street remains vastly reluctant to invest in civilian fission reactors, which still require enormous government investment and underwriting, even though they have been operating for more than a half-century.

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It is certainly the case that offshore drilling will not single-handedly solve America's energy problems or magically erase either the nation's voracious appetite for 20 billion barrels of oil per year or the ruinous costs of importing so much of it. But carrying out such drilling will help, rather than hinder, the inevitable transition the American people are going to have to make to change their lifestyle to consume far less oil and live more within their means.

The very fact that offshore drilling has been approved may have some further positive effect on lowering world oil prices. But the biggest factor in doing that in the short term would be for the United States to successfully reassure the world that it was not planning any airstrikes against Iranian nuclear facilities in the near future. That is because -- whatever the strategic case for any U.S. or Israeli pre-emptive airstrike against Iranian nuclear installations -- the very expectation that such a strike may come soon has been a major factor in driving the oil futures market sky high.

Global oil prices have dropped $18 per barrel in less than two weeks from an all-time high of $147. That is certainly impressive: But only a few months ago $129 was still an impossibly high level for most energy analysts to anticipate. The soaring demand for oil in China and India, as well as in the United States, is not going to go away.

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The Oil Voice Web site noted Friday, "Despite the drop, the 12-month average for New York futures remained true to form, rising above $100 a barrel today. In the continuing trend of rising oil prices, futures are up 74 percent on figures this time last year."

The biggest long-term reason Bush's decision is unlikely to have any serious effect on oil futures, however, is that international investors know the Democratic Party majorities in both houses of the U.S. Congress are dead set against it. If presumptive Democratic presidential nominee Sen. Barack Obama of Illinois is elected in November, oil investors expect one of his first acts will be to re-impose the offshore drilling ban.

Even if Republican front-runner Sen. John McCain of Arizona wins the presidency, investors believe he will have great difficulty in keeping the door open to offshore drilling. Certainly, if the Democrats win big enough majorities in the Senate and the House of Representatives, they could legislate a new drilling ban and make it stick even over McCain's presidential veto.

The claim that offshore drilling would only be a boon to the oil companies that would be free to sell it anywhere in the world is quite simply a facile and false one: Future U.S. administrations would have the power, as other countries around the world have done, to impose conditions on the oil companies to which they grant leases to extract the oil that would earmark as much of it as they demand for domestic U.S. consumption.

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In the long run, there is no doubt the American people will have to find alternate fuels to oil to power many of their vehicles and that many American farmers will have to slowly and painfully learn more organic -- even if far less productive -- methods of farming, because the price of nitrate fertilizers, which require so much oil to produce, will go through the roof. A switch back to a greatly expanded national rail network and away from aircraft, for both passenger and cargo long-distance transportation, may also be economically inevitable.

Expecting offshore drilling to prevent or reverse those trends is as realistic as expecting the tides of the sea to turn back because King Canute told them to.

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