License to Drill

Before anyone gets too excited about off shore drilling or drilling in ANWAR, they should probably take a look at ExxonMobil's 2007 Proxy Statement. In their proxy statement, ExxonMobil lays out their long-term business outlook (to 2030). They state that their investment decisions are based on this long-term plan, "using a disciplined approach in selecting and pursuing the most attractive investment opportunities". In other words, they will invest their money where they will get the biggest return. Very sound business approach. ExxonMobil also lays out various assumptions used in their plan, the two most significant ones being that oil, gas, and coal will remain the most predominant energy sources with approximately 80% share of total energy, and that renewable energy sources (wind, solar and biofuels) will be only 2% of world energy, despite growing at 9% a year.
As for ExxonMobil's long-term plan, they expect a shift in the geographic mix of its production volumes between now and 2012, based on current and future development projects. Oil and natural gas output from West Africa, the Caspian, the Middle East and Russia is expected to increase from 38% of total production to 50%. The remainder of the production, which includes Europe, North America and Asia Pacific, will fall from 62% to 50%. Clearly, ExxonMobil plans to invest their record profits in West Africa, the Caspian, the Middle East, and Russia. Why? Because they make more money on their investment in those areas. One of the more interesting schedules in ExxonMobil's proxy statement is one showing the return on average capital employed for the business segments (Upstream - development and exploration, Downstream - refining and marketing, and Chemicals). This schedule tells us that ExxonMobil's return on average capital employed in the United States for upstream operations was 34.7% in 2007, while the return was 43.7% in the rest of the world. This would seem to support Big Oil's contention that drilling for oil in the United States is more expensive than other places in the world. But a far more telling figure is ExxonMobil's return on downstream operations (sales of refined gas and natural gas). In the U.S., the return is 65.1% versus 28.7% for the rest of the world. Now we know why we are dependent on foreign oil and always will be. The most profitable business model for ExxonMobil (and probably every other oil company) is to drill for oil outside the United States and sell the gas to the United States. Big Oil is just doing what any business should be doing - maximizing returns for their shareholders.
The question I have for Congress and anyone else advocating opening up ANWAR and the coastal waters to Big Oil is "What, in God's name, makes you think Big Oil has any intention of actually drilling in these areas?" Their ONLY interest is obtaining the drilling rights so that they can keep anyone else from drilling there. This is the reason they have not done any drilling on the 68 million acres of leases they already have. If Congress (and anyone running for president) expects to actually get oil out these areas, they need to lease the land to a company that is dedicated solely to drilling in the United States.

With apologies to Bob Dylan:

Now, there's a woman on my block,
She just sits there as the night grows still.
She says who gonna take away his license to drill?

If You Want My Vote

I love it. John McCain complains about all the attention that Barack Obama gets from the press, yet when he does get a little PT (Press Time), all he does is talk about what Senator Obama will do if Obama is elected President. I have a little advice for Mr. McCain. If you expect to get this Independent’s vote, start telling me not only what you will do if elected, but how you plan to do it. I am dying to know how you plan on balancing the budget, now that Mr. Bush will be leaving you a half a trillion dollar deficit for 2009. How is drilling for oil in ANWAR and offshore going to produce one additional gallon of gasoline during your administration? How is maintaining Bush’s tax cuts going to stimulate our sick economy? Are Bill Gates and Warren Buffet going to start shopping at Wal-Mart to create a trickle down economy? Now that the surge is a success, does that mean we have won the war in Iraq? If not, how will we know when we have won the war? When you tell us we’ve won? You told us you know how to win wars. What wars have you won?
If Senator McCain expects to become President McCain, he needs to give the American people a reason to vote for him, not reasons to vote against Obama. After all, if he is elected, he won’t have Obama to blame for the high gas prices anymore.