Psychodrilling

Here comes Bush, echoing John McCain by conceding that offshore drilling won't actually do anything to reduce oil prices but saying it's a good idea for psychological reasons:

The Green Lantern Theory as applied to foreign policy is wrongheaded, but as applied to energy supplies it's downright bizarre. Demand for oil is growing faster than supply, leading to high prices and over the long run global demand will probably keep growing. The smart strategy would be to start reorienting our infrastructure to build a less oil-dependent country. Psychology has nothing to do with it.

Comments

This isn't quite right since building the political support needed to reorient our infrastructure depends a lot on psychology. Of course the psychological changes needed are undercut by the kind of proposals that McCain and Bush support. But that doesn't mean that they are not psychological.

Posted by Lon | July 15, 2008 4:21 PM

If anybody still needed to be convinced that the right-wingnutosphere is completely incompetent when it comes to the economy, it's staring you in the face right here. They can't even understand basic supply and demand, or the impact of a brutally weak dollar.

Posted by LFC | July 15, 2008 4:21 PM

LFC:
But Commander Codpiece claimed he got a "B" in Econ at Yale(Or was it Harvard Business School?)!!

Posted by Joe Klein's conscience | July 15, 2008 4:24 PM

I'd like to hear the complete quote in the video (they apparently stop in mid-sentence), but if he's saying what I think he's saying (that it's going to help the economy by fooling the consumer into thinking that all we have to do is dig some new holes and then our energy problems will be solved), I think the statement is a very self-serving one and is one of Bush's worst statements as President.

http://www.swanpoliticsblog.blogspot.com

Posted by Swan | July 15, 2008 4:30 PM

But Commander Codpiece claimed he got a "B" in Econ at Yale(Or was it Harvard Business School?)!!

I'm sure. And then he drove several companies into the dust. Then he became governor of Texas and left them with a billion dollar budget deficit at a time when the economy was still roaring.

This asshat has a track record of leaving destruction in his wake, and he has done the same in his current position. It's no wonder he didn't repair the damage of Hurricane Katrina. He probably felt he should let the destruction stand out of professional courtesy.

Posted by LFC | July 15, 2008 4:30 PM

Psycho Driller,
Qu'est-ce que c'est?
fa fa fa fa fa fa fa fa fa far better
Run run run run run run run away
OH OH OH
Psycho Driller

Posted by joejoejoe | July 15, 2008 4:30 PM

Well, this all points the continuing national schizophrenia over energy policy. With gasoline prices soaring a great deal of the discussion over the last few months has revolved around differing ideas to achieve the foolhardy goal of making energy to power cars cheaper: shale oil yes or no; more Saudi pumping yes or no; off shore drilling yes or now; ANWR yes or no; reducing fuel taxes yes or no. If we're serious about both having a vastly improved energy economy and countering climate change, what's happening now is just what the doctor ordered. We should be talking about ways to both push the price of energy higher (at least in the long term) and making sure it doesn't crash again in the event of global economic downturn.

Incidentally, does anybody know if Obama's cap and trade proposal covers auto fuel?

Posted by Jasper | July 15, 2008 4:38 PM

Actually, psychology has a lot to do with pricing. There's been a lot of research on this as of late, hasn't there?

Anyway, if people think oil is scarce, they'll be willing to pay more for it, which makes it easier for oil cartels to jack up prices. Also, if speculation is playing a role in price increases, then the psychology of the situation is important.

Of course, this all is indicative of how wrong-headed "the markets are magic" policy making is, isn't it? Has the GOP just admitted speculation is important in oil prices? That Econs 101 doesn't explain everything about the price of oil? That people are more complex than 'self-interested rational agents'?

I think we liberals should be making political hay out of this admission by GW Bush that the fundamental economic assumptions of the GOP are wrong! But since too many so-called liberals are themselves corporate free-marketeers, I'm not holding my breath.

Posted by DAS | July 15, 2008 4:41 PM

Psychology has everything to do with it. Currently the Repubs are trying to capitalize on PO, by blaming it all on the liburls. But the psychological delusion, that once we step over a few liberal bodies, our problems will then be solved, really really prevents us from aggressively trying to move beyond oil. Perhaps if we allow this drilling, we will be able to get on to the real issue "Now what?", will we be able to begin to focus on the transition beyond oil.

Posted by bigTom | July 15, 2008 4:42 PM

Matt, this is different from any other Bush policy. Off shore drilling=huge revenues for oil companies because the government sells oil drilling rights below market value. So we can have even more Alaska type politics! Summer houses for all Republicans!

Posted by Rob | July 15, 2008 4:46 PM

Bush leaving office will do more to psychologically calm oil markets than plugging every drop of oil in American waters into the supply side of the market.

Posted by joejoejoe | July 15, 2008 4:50 PM

Question: How do companies that want to drill off shore get the rights to do so? Does the government sell permits? In other words could this be a ploy for the government to gain revenue that was lost due to the Bush tax cuts? (besides being a ploy to line the pockets of Republican donors)

Posted by jj | July 15, 2008 4:55 PM

Demand for oil is growing faster than supply, leading to high prices and over the long run global demand will probably keep growing. The smart strategy would be to start reorienting our infrastructure to build a less oil-dependent country.

I've always had a hard time buying the "war for oil!" line but it's become easier to swallow as of late. It truly is negligent, short of malicious, even, for Bush or McCain or anyone else in public office to be pushing for this crap. The only way I can see this being legitimate is if it was in a bill that called for massive investment in green energy, much like what Friedman, Obama, and Yglesias have called for. That way it's a relatively short-term fix for what is surely a long-term problem that is being legitimately addressed.

Otherwise, it's just a land-grab for the oil companies that will ruin tourist economies, threaten the wildlife in the areas drilled, and will only serve to increase our addiction to oil and put us in a worse position in the future for foreign oil dependence... which will call for more hokey, pie-in-the-sky drilling programs.

Posted by socctty | July 15, 2008 4:56 PM

Lon got it right first off. pychology has everything to do with it and of course McBush are looking to psychological effects. They want to win the election, right.

As Matt and others are saying the psychology McBush is looking for is the destructive psychology of denial, just what we don't need to deal with the problem.

Posted by Chris Dornan | July 15, 2008 4:57 PM

There's a better version of this argument made by Martin Feldstein. A lot of the oil price build-up is based on futures-if the future markets think that oil prices will decrease (even if it's not anytime in the short-term) then they'll bid down the price of oil.
Of course, drilling probably won't make a significant enough impact to cause a large drop in oil prices in future markets, but that's a different debate.

Posted by jamie | July 15, 2008 5:06 PM

The psychology argument is bullshit. There's speculation in every market, so looking for Boogeymen with spectacles on is stupid. And if you're arguing that "people will pay for a product what they believe it is worth", well then, no shit. That's neither a good thing or a bad thing; it's the way things are.

It's China and India, stupid. What do you think runs all those factories that are starting to make tons of those same comforts that we've been enjoying in the US for so long? The East is catching up in the "comforts of a civilized society" department, and there's really nothing we can do about it except try to wean ourselves off of oil where we can. The rest is just stupid presidential politics, trying to "win" an issue when acknowledging the truth is electoral suicide. China will have a larger economy than us in 20 years, and people don't expect this to have profound effects on the price of oil?

This is another reason why we can't afford to vilify and isolate the Middle East: the far East gains more influence there by the day by virtue of their economies.

Posted by socctty | July 15, 2008 5:09 PM

There's an article on The Oil Drum on rail electrification as a big step in the right direction.

Posted by BruceMcF | July 15, 2008 5:24 PM

It's China and India, stupid.

Increased demand from China and India are part of it, but there are other factors too.

China will have a larger economy than us in 20 years, and people don't expect this to have profound effects on the price of oil?

The price of oil is a matter of supply and demand, not the size of China's economy. Or any other national economy. Or even the global economy. The U.S. economy grew dramatically between 1981 and 1999. So did the world economy. And yet the real price of oil fell over the same period. You can't simply assume that oil prices will rise as economies grow.

Posted by Mixner | July 15, 2008 5:31 PM

I may be missing something here (psychology is not my strong suit) but doesn't publicly admitting that a certain policy merely aims at shaping expectations kinds of defeats the whole purpose (regardless of what you think of that as a rational for policy decisions)?

Posted by Fabio | July 15, 2008 5:42 PM

You can't simply assume that oil prices will rise as economies grow.

But due to the fact that oil is mostly sold for U.S. dollars, you can assume that the price of oil will rise as the dollar falls, which is a major factor in the price right now. Of course, some of the oil producing nations might just give up on the dollar and start asking for Euros.

Of course, that clever George W. had a plan all along. He tanked the economy, which today caused the assumption that the slowdown meant less oil, which apparently dropped the price a bit. So he's killing our economy in order to save it. Heckuva' job.

Posted by LFC | July 15, 2008 5:43 PM

I may be missing something here (psychology is not my strong suit) but doesn't publicly admitting that a certain policy merely aims at shaping expectations kinds of defeats the whole purpose (regardless of what you think of that as a rational for policy decisions)?

Posted by Fabio | July 15, 2008 5:46 PM

But due to the fact that oil is mostly sold for U.S. dollars, you can assume that the price of oil will rise as the dollar falls,

No, you can't assume that either.

Of course, some of the oil producing nations might just give up on the dollar and start asking for Euros.

Yes.

Of course, that clever George W. had a plan all along. He tanked the economy,

Oh, stop being so ridiculous.

Posted by Mixner | July 15, 2008 5:52 PM

Spend any amount of time on a commodities trade floor and you'll realize that expectations about future prices--and therefore expectation about future supply--are very important in determining current prices, given that you can store oil relatively easily (if only by not producing it in the first place).

Just look at the forward curve for crude; it hasn't been in severe backwardation or contango for a long while. It's pretty ludicrous to look at a flat forward curve and say that future supplies won't make any difference for current prices.

Posted by bottomofthe9th | July 15, 2008 5:52 PM

If he could do this by executive order, why didn't he do it earlier?

Posted by Bob | July 15, 2008 5:54 PM

So Matt, noted economist, is claiming that increasing the net supply of oil won't matter.

Let's stop training doctors, too - it takes years to get one through school and residency, so there's clearly no point.

Posted by James Robertson | July 15, 2008 5:54 PM

Jim-Bob, don't act like an idiot. The United States has 2% of the world's oil reserves. You know this, too, but it's just too tempting for you to scream "SCREW THE HIPPIES!" out of spite.

You wouldn't actually try to bail out the ocean, unless you thought it would annoy your parents who wanted to go home from the beach.

There's a reason, Jim-Bob, why right-wingers receive no intellectual respect. It's because you say such asinine things.

Posted by Tyro | July 15, 2008 6:00 PM

As noted, psychology has a very great deal to do with this bubble, as usual. Just look at the historical record--when Bill Clinton took office, oil was about $10 bbl. It goes up, it falls down.

There is no supply problem, and much sooner than bringing new fields on line in deep water or arctic locations with high production costs, Iraq can inject huge increases for relatively minor infrastructure investments of the sort currently being negotiated by big multinationals with the expertise and capital to make an immediate impact.

Posted by robert powell | July 15, 2008 6:14 PM

Tyro, by your argument, no one on the left should care about global warming. Nothing we do will have impact for a very long time, so it's just pointless. Small steps are irrelevant.

Posted by James Robertson | July 15, 2008 6:16 PM

Mixner said... Oh, stop being so ridiculous.

Am I being any more ridiculous than McBush? They yammer on about how much expanding the area open to offshore drilling will do, but ignore the act that 4x the amount of expected reserves are already leased but unexploited due to lack of equipment and experience people. They also fail to note that the amount produced will be a pittance. They also tell us, falsely, that Hurricanes Katrina and Rita caused no significant oil spills, when it actually caused nearly 600 (onshore and offshore), destroyed rigs, damaged pipelines, and dumped about 9 million gallons of oil over a wide area. You can see the plumes in the Gulf in satellite images.

Actually, I was being sarcastic. They are being ridiculous.

Posted by LFC | July 15, 2008 6:26 PM

Tyro, by your argument, no one on the left should care about global warming.

Sadly, no -- by Tyro's argument, we should focus our efforts not on extremely marginal policy approaches that entail substantial, known costs and illusory benefits (opening up American reserves), when a better, but countervailing approach exists that presents a long-term solution (oil independence).

Posted by StJoe | July 15, 2008 6:38 PM

Sadly, no -- by Tyro's argument, we should focus our efforts not on extremely marginal policy approaches that entail substantial, known costs and illusory benefits (opening up American reserves), when a better, but countervailing approach exists that presents a long-term solution (oil independence).

But they're not countervailing. As you note, oil independence is a long-term goal. Very long term. Under even optimistic projections of the rate at which we could realistically replace oil with other sources of energy, we're still going to need very large quantities of oil for decades to come. And increasing production from our domestic reserves will make us less dependent on foreign supplies while we transition to an oil-free future.

Posted by Mixner | July 15, 2008 6:56 PM

The oil industry is so profitable that they might have to start paying some tax. And we can't have that! Somebody get that oilman a depletion allowance pronto!

Posted by Aatos | July 15, 2008 7:36 PM

The left is simply opposed to energy use, period. (other than private jets and SUVs for the worthy few). The rest of us can live in mud huts with 2 hours of electricity per day from the small number of windmills they allow to be built well out of the visible range of the same worthy few.

Posted by James Robertson | July 15, 2008 7:36 PM

Actually, solar energy may be closer then we think. Attached is a link to a post by Dr. Steven Novella on his blog discussing some new technology out of MIT. Now I'm sure that Mr. Cownie will be along to pooh pooh this research but I would take the opinion of Dr. Novella over 100 Cownies.

http://www.theness.com/neurologicablog/?p=334

Posted by SLC | July 15, 2008 8:31 PM

socctty - Otherwise, it's just a land-grab for the oil companies that will ruin tourist economies, threaten the wildlife in the areas drilled, and will only serve to increase our addiction to oil and put us in a worse position in the future for foreign oil dependence.

By 3-1, the public wants to drill, and by 3-1 also considers the energy crisis 30 years of environmentalist obstruction has got us into is more important than long-range global warming issues.
It is slowly beginning to dawn on tourist places that unless they are part of the solution that allows adequate energy for tourism and the 2nd home or timeshare condo industry to exist - they are screwed. Hence the rapid change of heart in Florida, now watching the lamps in hotels going off all over Florida from the Panhandle down to Miami Beach and worried they will not be lit again in their lifetime.
Wildlife is not killed in areas nuclear power or oil drilling happens - it is preserved in wildlife refuges and sanctuaries around the sites. Wildlife is killed off when habitat is permanently lost to human sprawl, cultivation - including the 100s of thousands of acres of cerrano and rainforest lost to mono sugarcane ethanol production.
Saying that developing domestic oil or oil substitute only "increases out foreign dependence" is so brainless I'm surprised even a liberal like socctty could say it.
*********************************
Tyro, by your argument, no one on the left should care about global warming.

Pretty true. The Leftist argument that drilling must be blocked because it offers no immediate relief for the consumer also argues against any R&D effort to make solar and wind a viable replacement for oil in a hydrogen or low-priced electricity economy in 30 years. Or the rest of us feeling better about blocking any carbon cap & trade or tax Lefties want because we get no immediate benefit. Or how similar their argument is to blocking all nukes even though they generate no CO2 for 30 years while France and Japan have gone from 20 and 15% nuke up to 80 and 55% respectively in the 30 years the US was blocked by the Left and The Lawyers...

The truth is the American public is screwed, there are no quick fixes. They are in a mess it took 30 years of complacency and allowing "progressives" to block all new energy sources, refineries, and growing America's population with Open Borders from 180 million in 1950 to US Census estimated 436 million net energy users in 2050. And brainless cheerleaders in both parties lauding the population explosion globally as raising GNP and corporate profits as the "hard stop" on resources like fresh water, oil, arable land - was ignored.

1. It will take 5 years for drilling to have an effect on the massive loss of wealth from Americans to China and the Oil exporters.
2. It will take 5 years before we can get new nukes on line even if the environmentalists and their courts get neutered in a national emergency.
3. Solar and wind are 30 years out from making a serious dent in replacing oil IF research and boosters promised economies of scale pan out.
4. Conservation and efficiency gains, as from 1973 to 2003, is completely overwhelmed by the masses of Marias, Juans, and Abdullahs pouring in from abroad, and their spawn. In Japan and Europe, they stated from the start that conservation and efficiency would only lower energy demand if they stayed close to replacement population levels.

What is needed, to keep the "bad years" down to under 5 is a National Energy Plan that legally may waive all obstructionist environmental and legal cahallenges in a declared National Emergency, and which rationalizes which energy sources will be developed, that they stay in the US except for only a few allies who end in crisis, in only very special circumstances.

Elements of such a comprehensive energy plan:

1. A freeze on immigration and no extra welfare benefits for extra kids,
2. Full drilling for oil and gas EVERYWHERE with only limited environmental or court challenges limited to only 1 year of proposal, 6 months appeals.
3. Full assessment of oil shale and coal liquification projects under the same restrictions on blocking them as oil drilling.
4. Replacement of natural gas plants with nuclear, freed up natural gas used as an oil substitute.
5. Excess profits, meaning anything that exceeds a set profit margin after full exploration and development costs are exceeded and reinvestment - are used by the firms or US government for renewable energy research and test plants for solar, breeder reactors, fusion, geothermal, switchgrass, etc.
6. Try and get CAFE standards that make up for the added energy use of 30% or so of already arrived aliens and their spawn.
7. Lower speed limit to 55 so the masses suffer and know that this crisis is real, but also eliminate the Elites ability to deduct private jet travel as a business or NGO/Foundation expense and slap them with a luxury 3 buck a gallon tax on private jet fuel or their luxury boats exceeding 6o feet in length. And do a 50% cut in present travel by VIP personnel in the Executive (inc the President) and Congress.
8. Plan administered under a state of national emergency with goals that since global warming is assumed to be real, anything that does not reduce dependency on foreign oil must be CO2 neutral, CO2 free, or offset.
9. Environmentalists would still have an important say, especially in matters of permanent wildlife habitat or environmental loss (solar farms in delicate desert habitat, housing developments in certain environmental areas, or something that truly threatens, rather than impinges on endangered species.) But they would have to sell their objections to the energy plan leaders or through Congress - no more 30-year long blocking lawsuits in courts permitted - by emergency writ of Congress.

Be honest with the People. They should know that they must drill, do a pile of things in parallel and they will suffer the damage of the last 30 years of Congressional inaction and lawsuit gridlock for 3-5 years.

Posted by chris ford | July 15, 2008 9:29 PM

Would anyone else join me in the sentiment that the push for more drilling is a very short-sighted & selfish move by the older generation? Admittedly, I worry about the failure to encourage a less oil-intensive economy; however, our need for oil will remain for many decades even as a transition occurs (here's hoping).

Given that unfortunate fact, I am of the opinion we need to keep any more oil deposits untapped so that it will be there as a resource in 20-30 years when all the current pols have long since come to dust.

MATT - please, raise this issue. Older journalists haven't thought of this either. WE WILL NEED OIL IN THE FUTURE, and Bush McCain, et al are selfishly claiming it all for themselves.

Posted by Mark Entel | July 15, 2008 11:34 PM

Chris Ford is right, only democrats have held political power in the last 30 years, and Jimmy Carter was absolutely silent wrt the energy crisis.

Posted by mike | July 16, 2008 2:14 AM

Won't Matt feel like a Gloomy Gus when they find barrels full of smiles at the bottom of those oil wells. I'm giving Bush the benefit of the doubt and assuming that's his strategy here.

Posted by aleks | July 16, 2008 6:51 AM

Re James Robertson

I wish Mr. Robertson would get his stories straight. Several days ago, Mr. Robertson told us that Craig Venter was going to solve the energy problem by using algee/microbes to manufacture oil from atmospheric carbon dioxide. Now he tells us that off shore drilling is imperative.

Posted by SLC | July 16, 2008 9:16 AM

I posted a link stating that it looked like a possibility. Relying on any one solution would be a dumb idea, but that seems to be the left's plan: conserve or die. And oh by the way, make sure that we keep lots of immigrants coming in with new demands for energy, so that conservation can't even slow the rate of demand growth.

Posted by James Robertson | July 16, 2008 3:48 PM