President George Bush was busy managing his legacy again. He is expected to overturn the executive order banning off shore drilling. The ban was originally signed, ironically enough, by his father. Wouldn’t you love to be a fly on the wall at the Bush’s, by the way? Wouldn’t you love to hear what George senior says to Mrs Bush before they turn out the lights at night about their son? Anyway, I digress. The move would be largely ceremonial because there is still a federal law on the books banning such activity. What I find interesting is the comment by Fadel Gheit, oil and gas analyst with Oppenheimer & Co. Equity Capital Markets Division who said, “If we were to drill today, realistically speaking, we should not expect a barrel of oil coming out of this new resource for three years, maybe even five years, so let's not kid ourselves."
I realize that the current state of politics in America does not allow for any vision more far reaching than the end of a political term, but has that attitude spread to the financial sector as well? Is the only motivating force the effect on the next quarter’s numbers? That was the way it was in the ‘70’s with auto makers. No long term investments were initiated that would adversely affect the short tem price of stock. The result was catastrophic for the US auto makers. They never recovered from that hit, and in fact, have duplicated that “strategy” with their heavy reliance on SUVs and small trucks this decade. Are the financial institutions of this country following the same dubious blueprint?
I’m not sure how I feel about the off shore drilling question. I could be swayed either way at this point as I gather information from both sides of the fence. I was just sidetracked by the idea that the time it will take to have an effect is the motivating force. What is five years in the large scheme of things? Five years ago, gas was $1.90 a gallon or so. Bush still had supporters, and a reasonable though modest approval rating from the American people. Offshore drilling would almost certainly be profitable. Candida Scott, an oil industry researcher at Cambridge Research Associates, said oil needs to be priced at $60 a barrel or more to justify deep-shelf drilling. With oil now selling for $145 a barrel, companies are almost assured of profiting from offshore drilling, Scott said. Shouldn’t any discussion start with that? Then an analysis of the possible environmental impacts, with a history of current drilling rigs safety. What are cost construction costs of such initiatives? Who pays? Does the federal government continue to subsidize the cost with huge tax breaks to the oil companies? These are the questions, it seems to me. The time it will take to accomplish the goal is incidental. And as to Mr. Bush’s support – haven’t we reached the point where his support for anything triggers a negative response from most Americans?
By Myron Gushlak
