Actually, I think that a credible threat of real and massive US domestic oil exploration will cause OPEC to pump up production and drive down the price like a rock. I just don’t understand why we don’t do it.
-—that has been my conetention all along-—start drilling the California and Florida coasts, get going on ten state-of-the-art refineries, contine development of methods for increased extraction from present reserves—and get on with nuclear power generation as well as all the coal plants economically feasable—
While NOBODY here likes paying $2 or $3 per gallon for gas, I’d almost be willing to do it if the gas came from the U.S. and by using our own resources, we broke the backs of all the Opec nations.
Likely someone is getting paid off.
Besides, it’s not worth it for prices to go down when they now realize they can get so much.
A “credible threat” has to have teeth. That means actual capital investment in recovery. Enough capital investment to make a offset significant demand from OPEC might be hundreds of billions of dollars.
That is what is being invested into oil sands recovery in Alberta Canada, and the end result still won’t be much output compared to OPEC.
Private enterprise is afraid to invest too rapidly and build recovery capacity too rapidly, because they risk OPEC doing exactly what you say — dumping cheap oil on the markets to drive the domestics into bankruptcy. It would be good for consumers of oil to get lower prices, but bad for the investors that spent money on infrastructure that is then unprofitable.
I think a possible solution would be for the Federal government to place an open bid for domestically produced oil — say a billion barrels per year guaranteed to renew for 20 years — at a price high enough to yield a profit to the oil companies in the event they cannot sell it for more than that on the world markets. If oil companies were guaranteed a buyer-of-last-resoort at $35, then their investment in infrastructure couldn’t go down the tubes by something OPEC does. The Federal government would only actually buy the oil if the oil company couldn’t sell it for more than that. In that event, the government would take a loss when they had to buy it at $35 and then sell it themselves for less. The maximum loss would be $35B/yr, but for that to happen the market price of oil would have to have hit ZERO. Obviously not going to happen. It likely wouldn’t cost the taxpayer much if anything, but it might influence the market by protecting domestic oil producers from OPEC dumping cheap oil on the markets to drive the domestics into bankruptcy.