Barack Obama on the Oil Crisis

A Message from Barack Obama...

Dear Michael:

Thank you for advising me to oppose efforts to limit domestic oil and gas exploration as a method to address high gas prices. I was glad to hear from you.

I agree we must seek new domestic sources of energy as part of a comprehensive strategy to reduce our dependence on petroleum imports. Drilling in the Arctic National Wildlife Refuge, or in restricted areas of the Outer Continental Shelf, however, are not the solution to the broader, multifaceted strategy needed. We should continue to look for new sources of domestic natural gas and oil production, but not unless the pursuit of alternative fuels and energy efficiency is conducted at far greater levels than has been done in the past, or we will never free our nation from the influence of global oil markets.

With regard to natural gas, the bulk of established recoverable reserves -- more than 80 percent according to a February 2006 U.S. Minerals and Management Service’s Report to Congress -- is located in areas already open to drilling. The 2005 Energy Policy Act created the largest federal natural gas R&D program ever established, providing $50 million annually for 10 years to improve access in ultra-deepwater and unconventional onshore gas resources. A study conducted by the National Petroleum Council identifies these unrestricted areas as the most likely sources of gas to meet future demands, and the U.S. Energy Information Administration, which provides the official energy statistics of the U.S. Government, predicts up to a 20 percent increase in gas supplies by 2025 from these open sources.

With regard to oil, the Energy Information Administration reports that drilling in the Outer Continent Shelf in the Pacific, Atlantic and eastern Gulf regions in areas that are not open to drilling “would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.” To view the full report, you can visit:

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html

In addition, a House and Senate Joint Economic Committee analysis found that drilling in the Arctic National Wildlife Refuge could reduce fuel prices between 1 to 4 cents by 2018, an amount that could be reduced should the Organization of Petroleum Exporting Countries (OPEC) choose to limit oil production -- a strategy they have employed in the past. I have enclosed this study for your reference.

The solution to mitigating gas price shocks, therefore, is further distancing the nation from OPEC pricing and making a long-term transition to alternative energy sources and improved conservation or development of oil and natural gas substitutes. Without this approach, oil and gas drilling will only postpone what will be a major crisis -- far worse than current conditions.

In the short term, however, I have worked to address the unchecked speculation that is occurring in our energy markets and contributing to the fuel price volatility experienced by motorists. On June 12, 2008, I joined my colleague Senator Dick Durbin in introducing S. 3130, a bill to increase transparency in the oil futures markets by providing greater resources to the Commodity Futures Trading Commission to detect and punish price manipulation and excessive speculation. This bill also moves the CFTC inspector general out of the CFTC Chairman’s office, and stops speculators from escaping U.S. regulations by manipulating the use of foreign markets.

Again, Michael, thank you for contacting me. You can rest assured that I will continue to work with my colleagues to develop policies that will lead to true energy independence while ensuring environmental sustainability.

Sincerely,

Barack Obama
United States Senator