The “Drill, baby, drill!” mantra of the 2008 Republican National Convention was cynically answered by Barack Obama supporters at the Democratic Convention with: “You can’t drill your way out of the problem.” To address what President Obama called the worst worldwide crisis in living memory, the President promised hundreds of thousands of new green jobs if America abandoned its reliance on oil and gas, which he contemptuously refers to as the “fuel of the past”.
During President Obama’s term in office, he will have escalated the federal debt by $6.4 trillion–31.6 times the $202.6 billion debt the Franklin Roosevelt Administration incurred to deal with the greatest worldwide crisis of all time: defeating Nazi Germany and Imperial Japan. But unlike Obama, FDR achieved victory by expanding domestic oil and gas production and delivery.
In spite of the Obama Administration, a rag tag assortment of small “wildcat” oil and gas entrepreneurs have proven that America has over 100 years’ supply of natural gas and over 50 years’ supply of oil. With Obama’s green initiatives in tatters, his new strategy seems to be taking credit for drill, baby, drill achievements. Yet he is fearful of the political consequences of building the pipelines to pump, baby, pump all that oil and gas to markets.
With war looming, FDR appointed Harold Ickes, former Secretary of the Interior, to select 72 leaders of America’s oil industry to serve on the Petroleum Industry War Council. Ickes would later describe in his book, “Fightin Oil”: “as one of the great coincidences of history”, the first meeting of the PIWC was scheduled for Monday December 8, 1941–the day after the Japanese attack on Pearl Harbor. Within weeks, the PIWC had mobilized America’s 1,500 oil companies, great and small, to work amicably with the government to win the war. With full involvement of the oil industry, America began massive drilling and quickly developed the technical capabilities to refine huge quantities of gasoline, including the 100-octane grade needed for aircraft.
To get energy supplies from Texas to the East Coast refiners to fuel Atlantic supply convoys, the industry in one year built the two largest diameter pipelines in the history of the world, the Big Inch and the Little Big Inch. During the war, U.S. oil companies delivered 6 billion out of a total of 7 billion barrels of oil consumed by the Allies. The Army-Navy Joint Chiefs of Staff wrote a letter to the PIWC in 1945 stating that “at no time did the Services lack for oil in the proper quantities, in the proper kinds and at the proper places.” Field-Marshall Von Rundstedt, commander of Germany’s Western Front, attributed Germany’s defeat to three factors involving oil: (1) Allied bombing, (2) Allied naval bombardments, and (3) Germany’s gasoline deficiency.
For three years the Obama Administration energy policy focused on pouring $60 billion into alternative energy, while limiting U.S. drilling off the Atlantic Coast, Florida Gulf Coast, Gulf of Mexico, Arctic National Wildlife Refuge and federal lands in the Rockies. Due to these policies, the average price per gallon of gas just hit an all-time-high for this time of year at $3.84 a gallon.
But the good news is that, because of the painful jump in gasoline prices, domestic production is going through a transformative change. High prices are motivating a drilling boom that relies on new techniques of horizontal drilling and hydraulic fracturing to make production on formerly “non-commercial” oil and gas reservoirs now attractive. Consequently, the share of imported oil Americans consume has fallen from to 60.3% to 44.8% (lowest since 1995).
These drilling methods have also increased the natural gas extraction from shale deposits by 50%, driving Shale gas from 5% to 25% of domestic supply. The U.S. is now the world’s largest natural gas producer and supplies 80% of domestic demand. With supply rapidly increasing, the benchmark price of natural gas in the U.S. has fallen from $135 per thousand cubic meters (mcm) to $88 mcm. Analysts expect America to be the world’s largest exporter of natural gas, since gas sells for $409 mcm in Europe and $589 in Japan and China.
Under enormous political pressure by voters angry at the price spike since the Keystone XL Pipeline was cancelled, the President plans to go to Oklahoma on Wednesday to approve construction of the bottom 25% of the pipeline. Given FDR’s success at partnering with the oil industry to build the Little Inch and Little Big Inch pipelines in record time, it would be interesting to hear FDR’s thoughts on Obama’s plans. FDR would probably just frown and say: “The only thing we have to fear is fear itself.”