Over a Barrel - The Truth About Oil

Last night, ABC's Charlie Gibson presented "Over the Barrel - The Truth About Oil." The program was a well-crafted presentation about the supply side issues of oil. However, there were some notable problems.

First, the program began with news clips about America's addiction to oil but provided minimal demand-side analysis of our appetite/need for oil. If we are truly addicted to oil, we need to address ways to use oil and energy more efficiently. With nearly two-thirds of oil used in transportation our emphasis should be in improving utilization. Petroleum is a depletable resource and we need to use it sensibly.

Second, the program didn't spend enough time on using other energy forms to displace oil. We should have initiatives that reduce and eliminate oil use in heating and power generation applications. Increased use of electric power generated from "clean" coal technology and renewables should play an increased role.

Third, in examining the cost components of gasoline, the ABC report failed to include the contribution of gasoline taxes. Taxes account for around 25% of pump prices compared to 10% added by private company margins. So State and Federal governments are making 2 1/2 times more net revenue than oil companies and gasoline stations.

Fourth, where would a news story on oil be without a conspiracy theory about the big bad oil companies. Gibson's interview with a consumer advocate did little to address the issue and only perpetuated the myth that "big oil" controls oil markets.

On the plus side, Gibson did a good job in covering the hidden costs in guaranteeing oil supply from the Middle East. We should increase Federal gasoline taxes to cover the expenses associated with "securing" this supply. This would reduce gasoline demand and help balance the budget.

It was good to see that sense of reason Boone Pickens on the program. Mr. Pickens emphasized that we are not going to drill our way out of this problem. This is a position that we have long supported. In a analogy to the illegal drug trade, the solution to addiction is not to produce more drugs. While we may produce more than the two million barrels a day from new finds that Pickens suggests, this problem is not going to be solved by supplying more oil.

The analysis of the role of speculators on oil prices was good except that Gibson gave the idea that millions of barrels of oil are being bought, sold and moved around the country. Most of the speculation is in paper barrels (options) rather than physical barrels.

The program had some good points, but fell far short of delivering on "The Truth About Oil."