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A dual approach to energy independence

July 06, 2008|By ROBERT GARY

Modern guided lateral drilling techniques would allow a drilling station with a very small surface footprint to tap a huge area underground in the Arctic National Wildlife Refuge.

I don't know how many species of caribou might be threatened by some small drilling stations and a few pipelines. I can say that two species of Americans are significantly threatened by the extremely high price of gasoline. They are the middle-class commuters who often must drive over 60 miles in a day for work. The other group would be the poor, who often drive older cars with poorer gas mileage, and who can barely afford to run their cars even when gas is reasonably priced.

Public health doctors have long recognized that poverty is the leading cause of early death and avoidable disease in America. Now we find that high gas prices are proving for many to be an early road to a poverty they never thought they would see. Which would you rather have, the money to pay for your pills or the money to pay for the gas to pick them up? Losing a few reindeer is a truly terrible thing, no doubt. If there were no worse things in the world, it should be humanity's No. 1 priority. But there are, so it's not.

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The offshore areas that are presently closed to oil leasing, and which run up and down the East and West coasts, contain a lot of potential for oil. They have not been explored. Since the 1970s, drilling techniques have improved so much that the risk of oil coming ashore from offshore rigs is miniscule. It will happen from time to time, but with proper regulation and close oversight, modern methods are so good that oil spills from drilling rigs will be infrequent and limited in their impact. Only the very best companies should be licensed to drill, and only with the fullest precautions and the most modern equipment. It can't be a helter-skelter oil rush and be safe. The top firms should be the leaders, and under a watchful eye of regulators with technical competence and professional integrity - no political insider favors, no special deals for campaign contributors, no more Bush/Cheney style government.

Those two things - drilling in ANWR and drilling on the continental shelf off our shores would actually impact the price of crude very quickly. A lot of what's in the $140-per-barrel price of crude is speculators' price inflation. Everyone wants some oil in their portfolio as an investment, even if there is no intention to take delivery on the oil. Speculators bid up the price for paper oil for long-term future delivery. But this paper oil immediately impacts the price of a barrel of real oil and gas today. The speculators' portfolio comfort comes at the expense of your daily real-world pain.

Adding supply is one way to bring the price of gas down. Opening ANWR and the offshore tracts would have an immediate impact by taking the froth out of the crude oil price. These huge prospective new supplies would make the world very dangerous for oil speculators. They would be gone very soon after such pumping was legislatively authorized and set in motion as corporate projects and engineering events. Who would buy long-term futures (paper oil) at inflated prices if there are six Saudi Arabias worth of oil quite possibly about to come online? Goodbye oil hedge fund managers.

The other way to bring the price of gas down is to reduce demand. It's hard to think of two better ways than the ones suggested recently by Sen. John McCain. He said, Let's have a $350 million prize for a huge breakthrough in battery technology for electric cars, and let's give a $5,000 tax deduction to anyone who buys a battery powered electric car.

I think the prize money is a little short. To get a core-technology breakthrough you need enough prize money so that all members of a consortium could recoup their research investments - so let's take it up to $1 billion for the prize money - the cost of about a day's worth of war in Iraq. The tax deduction, in order to work well for the broadest segment of Americans, should be capable of being applied over a 10 year period at $500 per year. That way, the lower middle class can use it.

The two McCain ideas for demand reduction - the battery prize, and the tax deduction, combined with the two best ideas for supply enhancement drill in ANWR and drill offshore would, cumulatively, bring the price of gas down to about half of what it is now. It would also save a lot of lives, and might save the planet as well. It would certainly save the U.S. from foreign entanglements that have proven onerous, costly and, sad to say, largely futile. OPEC can get along without us and we should give them a chance to do that. The way forward is to make ourselves able to get along without OPEC. Increase supply, reduce demand - together, they spell Independence Day and would make it a reality all year long. That is our tradition, so let's stick to it.

Robert Gary is a Hagerstown resident who writes for The Herald-Mail.

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