Energy Experts Refute Eric Bolling's Oil Price Fable
In at least six instances over the past three months, Fox's Eric Bolling has claimed that President Bush's July 2008 decision to lift the presidential moratorium on offshore drilling caused oil prices to drop from "$147 straight down to $33 a barrel in six months." Energy experts tell Media Matters that Bolling's analysis is wrong.
Bolling Repeatedly Claims Bush's Moratorium Decision Caused Oil Prices To Drop From $147 To $33
Bolling: "He Pulled The Moratorium On Offshore Drilling ... And The Prices Tumbled." From the March 7 edition of Fox Business Network's Follow the Money:
BOLLING: I hate to do this to you guys. Producers, guys, can you pull up a three year chart of oil, if you don't mind, when you get a chance. I'd love to do it. I'm going to show you exactly what happens when you drill, not when you release oil from the SPR.
But go ahead, he did release oil from the SPR -- he did pull the moratorium on offshore drilling, George Bush did, and the prices tumbled. They went from $147 to $33 a barrel.
BOLLING: All right. Take a look. You see this? There it is. That's the highest price ever traded. It also happens to be two days apart from when George Bush said you, know what guys, we're pulling that offshore moratorium on prices. It went from 147 to 33. Keep it up for one second.
BOB BECKEL (Fox News contributor): My point is that what would happen if we announced we were going drill in ANWR, today. Do you think the price of oil would go down?
BOLLING: Yes. It would dramatically go down.
BECKEL: You do? It would? Tomorrow -
BOLLING: It would go down the tank, just like when we pulled the moratorium offshore on offshore drilling. It went from 147 to 33. [Fox Business Network, Follow the Money, 3/7/11 ]
Bolling used the following graphic to illustrate the supposed connection between Bush's announcement and the drop in oil prices:
Bolling: "Bush Pulled The Moratorium On Offshore Drilling ... Look What Happened To The Price." From the March 7 edition of Fox News' Fox & Friends:
GRETCHEN CARLSON (co-host): But let's say that he says we're going to start drilling now. The effects of that would be immediate
BOLLING: I'm so glad you did that, Gretchen, can I hold up this chart?
BOLLING: I'm sorry you guys. Here it is. Here's the oil price headed up. This is 2008 -- here it is -- the highest price ever traded for a barrel of oil. Right there, July 2008. The same exact week - exact same week that George Bush pulled the moratorium on offshore drilling. He didn't release more oil, he started to drill more. Look what happened to the price. $147 straight down to $33 a barrel in six months. [Fox News, Fox & Friends, 3/7/11 ]
Bolling: "When George Bush Pulled The Moratorium On Offshore Drilling, Do You Know What Happened To The Price Of Crude Oil?" From the March 3 edition of Fox Business' Follow The Money:
KIRSTEN POWERS (Fox News contributor): Even if we had started drilling the day that Obama came into office, we still would not have enough oil.
BOLLING: Oh, we couldn't. Absolutely. I'm not saying it was going to produce overnight, Kirsten. But if you start now, hey, no time like the present. I remember this conversation 20 years ago and they said, well, if you drill now, we won't have it for 10 years. Guess what? We would have had it by now.
POWERS: You know what? I don't disagree with that. But I think that's an entirely different debate than what you're talking about right now where you're just blaming Obama for high gas prices.
BOLLING: I'm blaming Obama for not drilling, but he has --
POWERS: If I remember correctly --
BOLLING: By the way, When George Bush -- when George Bush pulled the moratorium on offshore drilling, do you know what happened to the price of crude oil? A $147 to $33 a barrel in six months. [Fox Business, Follow The Money, 3/3/11 ]
Bolling: "President Bush Removed The Moratorium On Offshore Drilling ... Within Six Months, Oil Went To $33 A Barrel." From the February 2 edition of Fox News' Glenn Beck:
BOLLING: So, John, let me throw this at you. July 14th of 2008, the highest price of oil ever traded, $147.25. Two days later, President Bush removed the moratorium on offshore drilling. That was the top. Within six months, oil went to $33 a barrel. Not that we were grabbing that much oil out of the ground immediately, but the thought of being able to drill more, what would that do to the price of oil? Would it matter if people were fist-pumping in the street in Cairo?
JOHN HOFMEISTER (former president of Shell Oil): Oil is a psychological price, as well as a material price. And it's the expectation of the future which drives the price. If the U.S. said we're going back to 10 million barrels a day in production where we were in the 1970s, all the oil markets would be calmed down immediately overnight. Now, we wouldn't get 10 million barrels for a number of years. But it's just the psychology of knowing that the U.S. will start taking better care of its own demand so it doesn't put so much pressure on global demand. [Fox News, Glenn Beck, 2/2/11 ]
Bolling: "The Reason It Went From $147 Down To 33 ... Bush Declared The Moratorium On Offshore Oil Drilling Obsolete." From the January 14 edition of Fox News' America Live:
BOLLING: Allow me to do this. Here's a chart of the oil prices over the last five years. This spike, right here, July 11, 2008. $147 a barrel. The reason it went from $147 down to 33, Megyn, Mr. George W. Bush declared the moratorium on offshore oil drilling obsolete. He lifted the moratorium. It dropped the price of oil by over $110 per barrel in a matter of six months. Now we're inching our way back up. We need more drilling, not less drilling. [Fox News, America Live, 1/14/11 ]
As he spoke, Bolling held up a chart of oil prices:
Bolling: "Bush Lifted The Moratorium On Offshore Drilling, And That Was $110 Drop That Followed." From the January 14 edition Fox Business Network's Follow the Money:
KIMBERLY GUILFOYLE (Fox News contributor): Yeah, you were talking about this earlier on Fox News Channel that we need to do, we've got to continue to drill.
BOLLING: You watched?
GUILFOYLE: I watch everything on this network.
STEVE ADUBATO: I didn't think that, I didn't think it really worked then and it's even worse today.
BOLLING: Guys, I'll do it again. I'll do it again. July 11, 2008, the highest price ever traded for crude oil. July 14th, George Bush put in the moratorium -- lifted the moratorium on offshore drilling, and that was $110 drop that followed that exact moment.
BOLLING: Immediately, in six months. [Fox Business, Follow The Money, 1/14/11 ]
Energy Experts Reject Bolling's Claim That Price Drop Was Caused By Bush's Moratorium Announcement
Energy Analyst Joseph M. Dukert: Bolling's Claim Is "Nonsense". Responding to Bolling's claim, Joseph M. Dukert, senior associate at the Center for Strategic and International Studies, independent energy analyst, and former president of the U.S. Association for Energy Economics said in an email:
Nonsense! Panic drove oil to that peak in 2008, but it was primarily the recession that drove it back down so far. Furthermore, U.S. domestic supply and demand are factors in world price, but usually not as significant as a variety of others.
Most energy economists applauded President Bush's action in regard to offshore drilling, but suggesting that this "caused" the precipitous drop in global oil prices is akin to the rooster's boast that his crowing brought the sun up. It's heartening that U.S. domestic production of crude oil in 2009 was the highest it had been since 2003 (up roughly half a million barrels a day over those preceding years) . . . and that last year (despite the moratorium on new deepwater drilling that followed the BP blowout) U.S. crude production increased again -- by about 250,000 barrels per day. But the countercyclical movement in 2010 showed that it makes little sense to attribute world price shifts to short-term U.S. production changes of any magnitude we might reasonably assume. It's a big world out there! [Email to Media Matters, 3/7/11]
Energy Economist Michael Canes: Bolling's Analysis "Is Not Correct In My View." In an email, Michael Canes, Senior Research Fellow at the Logistics Management Institute and former Chief Economist of the American Petroleum Institute stated: "I would support a lifting of the Congressional moratorium and increased offshore drilling, so I am not coming at Mr. Bolling's claim as an opponent. However, it's important to get the arguments right, and attributing much of if not the entire fall in the price of oil to President Bush's lifting of the offshore drilling moratorium is not correct in my view." Canes further wrote:
Coincidence is not causation, and in this instance I'd say that the two events - the lifting of the moratoria and the ensuing reduction in oil prices - are much more in the coincidence realm than one of causation. I say that for several reasons.
1. There was a Congressional moratorium on offshore drilling in place at the time, and this moratorium was not lifted with the President's action.
2. Even had that not been the case, the time from lifting of a moratorium to offshore leasing to drilling to discovery to production is measured in years, not weeks or months. At best, the possibility of future production from the lifting of a moratorium might have had some very slight impact on the present price of oil, but even that is questionable because of the uncertainties and timing involved.
3. Any such impact would be slight at best because worldwide production and consumption of oil at the time was about 85 million barrels per day, whereas new offshore U.S. discoveries from lifting of the moratorium likely would have yielded production of several hundred thousand barrels per day to maybe a million barrels per day, not many millions. While every bit helps, such incremental amounts could not have reduced world prices by over one hundred dollars per barrel.
4. Most oil market experts believe that the rapid and sustained reduction in oil prices that began in 2008 and extended beyond occurred because the world economy began to slow down and ultimately to experience a deep recession. This is one way to reduce oil prices, but not a very attractive one.
5. Finally, it is useful to put the President's lifting of the moratorium into context. It occurred during the election campaign of 2008, at a time when gasoline prices had skyrocketed in the U.S., and it was accompanied by a request to Congress to remove the Congressional moratorium, putting pressure on Democrats to respond. Just a normal part of politics, both sides push for such advantage during election season, the point only is that it's useful to understand the context of an action to better understand its rationale. [Email to Media Matters, 3/7/11]
Reports In '08 And '09 Attributed Drop In Oil Prices To Economic Slowdown
Wash. Post: "Overwhelming Cause Of The Collapse In Oil Prices Has Been The Faltering World Economy." From a February 20, 2009, Washington Post article:
Just one year ago, the price of oil finished trading at more than $100 a barrel for the first time, fueling speculation about a new era of oil prices. Yesterday, oil finished trading in New York at $39.15 a barrel, and that after surging 13 percent for the day.
The overwhelming cause of the collapse in oil prices has been the faltering world economy, which has fueled the drop in consumption.
Oil use in China, which most forecasters a year ago assumed would be the engine for increasing global demand, has screeched to a halt. Paul Ting, an independent oil analyst, says preliminary estimates suggest that petroleum consumption in China fell more than 6 percent in January compared with the month in 2008. Crude oil imports hit a 14-month low, he said.
In the United States, where passenger vehicles use about one of nine barrels produced worldwide, strapped motorists in December traveled less than they did a year ago, even though gasoline prices are more than $1 a gallon cheaper.
The Federal Highway Administration said it was the 14th consecutive month in which American motorists drove fewer miles. In 2008, U.S. motorists drove 3.6 percent less, or 107.9 billion fewer miles, than in 2007, the FHA said. Total miles driven, which normally rise every year with the population and number of cars on the road, fell slightly below 2004 levels.
The Organization of the Petroleum Exporting Countries has cut production three times since September. It plans to meet again March 15, and senior officials of the cartel said additional cuts in output are likely. But OPEC has been having trouble keeping up with shrinking global demand. [Washington Post, 2/20/09 ]
Investment Analyst Tim Hanson: Price Drop Caused By "The Economy And The Perceived Lack Of Demand In 2009." From a NPR's Morning Edition:
STEVE INSKEEP (host): Oil prices finished the year about a hundred dollars lower than they had been. Last summer oil was approaching $150 per barrel and some analysts predicted prices would keep going up. Instead oil prices crashed and closed yesterday around 45. NPR's Yuki Noguchi has more.
YUKI NOGUCHI: With oil-producing countries pledging a cut in production and unrest growing in the Middle East, it would seem oil prices should be heading up, except they aren't. The reason?
Mr. TIM HANSON (Senior Analyst, The Motley Fool): It would be the economy and the perceived lack of demand in 2009.
NOGUCHI: That's Tim Hanson, a senior analyst with research company The Motley Fool. He says what happened this year was a total flip of the supply and demand curve.
Mr. HANSON: Six months ago when oil prices were so high, what everybody saw was that we are finding and drilling for fewer and fewer barrels of oil every year as we exhaust proven reserves and that the demand for fuel product is going up very quickly, particularly in places like China and the other emerging economies.
NOGUCHI: But then came the financial crisis, and that had an impact on places like China, Hanson says, where dozens of factories shut down.
Mr. HANSON: These things are all interconnected. And when factories slow down and start making less, you know, we're going to use less energy, and oil prices are going to drop, which on the other end of things causes drilling to slow down a little bit, which maybe in a few years causes oil prices to go back up a little bit. [NPR, 1/1/09 ]
October 2008 NY Times Report: "Domestic Oil Demand Has Fallen To Its Lowest Level Since June 1999." The New York Times reported on October 16, 2008: "The decline in oil prices came after a government report showed domestic crude oil stockpiles rose more than expected as Americans use less oil, in part because they are driving less. In the last month, domestic oil demand has fallen to its lowest level since June 1999, at 18.6 million barrels a day, according to the Energy Department." [New York Times, 10/16/08 ]
Analysts: Oil Markets "Spun Around By Lower Consumption." From a September 17, 2008, Washington Post report:
But in two months, the world's total energy costs have dropped by more than $4 billion a day. That will hurt government budgets from Tehran to Juneau, but it will ease burdens for countless others. The United States, which spent $51.4 billion on oil imports in July, accounting for most of its trade deficit, is on track to spend much less than that this month, reducing pressure on the dollar, the trade deficit and inflation.
Oil markets, analysts said, have been spun around by lower consumption in a U.S. economy weakened by financial instability and by a change in sentiment among financial players, many of whom are scurrying to stem losses or protect much-needed capital.
"The downward pressure on oil is just extraordinary right now," said Daniel P. Ahn, an energy economist at Lehman Brothers. Just a few weeks ago, Lehman looked bearish when it forecast $94 oil for 2009, he said, "and that is already upon us." [Washington Post, 9/17/08 ]