Political Ramifications
Robyn Allen, Nigel Mesta, Cate Morgan, Michael Shaw, and Katherine Vater
The purpose of Team 9 is to determine the political ramifications of a decision
to drill or not to drill in ANWR.
Sections: Local/State ;
National; International; Summary
Local/State Political Ramifications
An investigation of the political groups
associated with the State of Alaska found that the political ramifications
of a decision for drilling would be good. The main benefit of opening
ANWR for drilling is the economic stability that it would bring to Alaska.
Oil is the main source of income and stability for the Alaskan government
and Alaska would be economically sound for 20-30 years after the opening of
ANWR, because of the oil royalties. This would allow for the State to
address important issues such as education and health care instead of combating
the unemployment and the slowed economy which will eventually be the result
of keeping ANWR closed.
Native Alaskans are hoping to gain more
political influence, something they have been losing since Alaska became a
state. The majority of their influence comes because of their corporations.
These corporations would benefit from oil drilling because of the royalties
they are entitled to by the Alaska Native Claims Settlement Act. The
larger these corporations grow the more economic influence they have on state
politics. The hopes of Natives that their economic influence will translate
to social influence can only be bolstered by the economic gains of oil drilling.
The State of Alaska has three representatives
in U.S. Congress: Congressman Don Young, Senator Ted Stevens, and Senator
Lisa Murkowski. Both Senators Stevens and Murkowski are already leaders
for the Republicans in the Senate. The opening of ANWR for drilling
won't affect their political careers. Looking at the picture of Alaska's
role in the federal government, Alaska will more than likely maintain its
current role when ANWR is opened. Alaska is already a major oil producing
state for the US and this would not change. One way Alaska could gain
more power in Congress is through an increase in representation, which only
comes with population increase. Oil drilling in ANWR will not increase
the amount of people that emigrate to Alaska, and so Alaska's congressional
standing won't change.
Native Corporations and the State of
Alaska will benefit from production of ANWR’s oil resources. Alaska,
on the national level, won't gain or lose any standing with a pro-drilling
decision. The combination of these factors and no major political drawbacks
indicate that the state political ramifications of oil production are better
than those associated with the protection of ANWR.
National Political Ramifications
ANWR is a current political
issue that has entered into the national spotlight. Democrats and Republicans
each have reasons for their current political position that are based more
on political perception than on scientific or economic data.
Democrats are opposed to drilling in ANWR because they see this as an opportunity
to block a policy that adversely affects the environment. It would be
an environmental victory against an administration that they believe is that
doesn't care about the environment – if they can successfully stop the bill
from passing. Republicans promote the opening of ANWR because of the economic
benefit to the people of Alaska, the oil industry and the nation and because
of national security reasons.
National security issues surrounding
ANWR center around the hope of energy independence. Even based on the
most generous data regarding the oil potential in ANWR, the United State’
dependence on foreign oil will continue. Current estimates, from the Energy
Information Administration, state that ANWR will decrease our dependence
on foreign oil by 4%, based on current consumption rates. The nation’s
dependence on foreign oil will continue into the foreseeable future. National
security has been suggested as a reason for justifying drilling for years,
but has gained new life in the aftermath of September 11, 2001. Senator Stevens
made an impassioned speech about the national security reasons for drilling
in ANWR in October 2001. There is no definite proof that decreasing US dependence
on foreign oil would increase national security.
Currently there is an Energy Bill before
the U.S. Senate. In the latest version drilling for oil in ANWR is approved.
Here is an excerpt from the Energy Bill:
SEC. 30403. LEASING PROGRAM FOR LANDS WITHIN THE
COASTAL PLAIN.
(a) In General. The Secretary shall take such actions as are
necessary--(1) to establish and implement in
accordance
with this Act a competitive oil and gas leasing program under the Mineral
Leasing Act
(30
U.S.C. 181 et seq.) that will result in an environmentally sound program for
the exploration, development,
and production of the oil and gas resources of the Coastal Plain;
Another aspect of the energy bill
in its current form would place quotas on how much US energy must be derived
from alternative resources. These would force businesses to expend money
on research and they would mean more government regulation and oversight of
the energy industry. This is one provision of many that promotes the decreased
environmental impact of the energy industry.
Republicans want to open ANWR for drilling
so much that they have placed themselves in a position that allows for the
Democrats to demand environmental protection measures in areas the Republicans
wouldn't normally concede. The Republicans still have want drilling
in ANWR to be approved, but Democrats have said they will block any attempt
to include it in the final bill, no matter what concessions the Republicans
include. Republicans lawmakers have even considered dropping the bill
if drilling is no longer an option.
Oil Companies don't want to spend time
lobbying for drilling in ANWR because there are many better fields in the
world with cheaper development costs and less political conflict. They
are more interested in another part of the Energy Bill – the curtailing of
government regulations on how gasoline is blended to meet emissions regulations.
For this reason oil companies support the Energy Bill.
Opening ANWR has implications for the
upcoming presidential election, if the bill is passed. The Republican
Party could promote the number of jobs the decision created and the positive
effect it has had on the economy. Democratic presidential hopefuls would
be able to paint Bush as anti-environmental for opening ANWR to drilling.
Also some Democrats claim that drilling ANWR would only be the beginning of
GOP plans to roll back environmental protection policies.
In the long run the political ramifications
would be minimal because one side would benefit and the other would lose.
International Political Ramifications
Oil is
bought and sold across country lines like any other commodity. However, since
1973, the practical workings of the oil market have been antithetical to the
nature of pure competition. The Organization of Petroleum Exporting Countries
(OPEC) has used its power as a cartel to control the market price of oil.
Prior to OPEC's actions in 1973, the
price of oil was stabilized at approximately $3 a barrel. OPEC took advantage
of the nearly perfectly inelastic demand for oil, and shortened its supply;
thus, the price for oil rocketed from $3, to $5, to $12, up to today's range
of $22 to $28. OPEC will cut or raise production so that the price doesn't
deviate from this range. While this sounds like a perfect system for the
countries in OPEC, it assumes that OPEC has unlimited production capability
and that they can cut off all world oil production.
OPEC itself satisfies
neither of those two assumptions. However, they are close. The eleven member
nations of OPEC -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria,
Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela -- control approximately
35% of world oil production. In many cases, this number would be enough to
minimize their impact. However, OPEC controls over 80% of surplus capacity
in the world; nobody else can raise production enough to balance out their
influence. Also, OPEC's control of 78% of proven oil reserves gives it a long
term capability to control the oil market.
The influence of
American drilling in ANWR therefore must be understood within the context
of the current oil market. While production in the 1002 region could yield
approximately 10 billion barrels of oil, its impact on the world oil market
will be minimal. Variations in proven oil reserves can make a difference
to one country's power in the market under a more traditional oligopoly,
but since the OPEC cartel can simply cut production by an equivalent amount,
the price of oil would remain in the current range.
There is a point,
however, past which OPEC cannot cut its production, because member nations
will simply ignore quotas. However, as world oil demand increases, and with
OPEC still controlling a significant majority of the world's excess capacity,
the production minimum will disappear within the next decade. And, coincidentally,
it will take that decade before significant quantities of oil can be extracted
from ANWR. At that point, the world demand will be high enough that OPEC can
cut its production by whatever comes out of ANWR and still maintain reasonable
quotas for its member states.
For a case study,
consider the influence of war in Iraq on the world oil community. Iraq's prewar
production level of 1.5 million barrels per day is, within a factor of two,
the rate of production in ANWR. The impact of war in Iraq – due to the cessation
of production of 1.5 million barrels per day – was next to nothing. Yes,
there was a temporary spike in the price of oil, most of which can be attributed
to fears of the war spreading to other oil producing countries; however,
the spike was temporary. By compensating in their own export quotas, OPEC
was able to maintain the price bracket on oil. Yes, drilling in ANWR is substantially
different from war in Iraq; however, the analogy to the oil market impact
does hold.
The impact of American
oil drilling in the wildlife refuge will be more than the simple number of
barrels of oil. The US will send a message that it is willing to do anything
to preserve its oil driven economy. As drilling in ANWR will lead to a slight
decrease in OPEC and Mid-East oil production, the situation for purchasing
oil on the European continent could be negatively impacted. That coupled with
the strong environmentalism present in European countries will lead to tenser
relationships between the United States and Europe.
In short, drilling
in ANWR will have a negligible impact on the economics of the world oil market.
In turn, that means that its political impact will be negligible, because
the United States will be in no stronger a negotiating position with OPEC.
The member nations of OPEC won't have any harder of a job to control the world's
oil production. Europe will still have negative feelings towards the
United States for its environmental policies.
Summary of Political Ramifications
Political ramifications of a decision
to drill in are hard to quantify and vary by the regions discussed above.
For these results to be included in the cost/benefit analysis it has been
assumed that drilling will proceed. The costs and benefits of this
decision follow. The local/state level would benefit. The Alaskan
government would be economically stable for approximately 30 years, dependent
on the amount of oil and time of production. This stability will lead
to the support of government sponsored organization such as education, public
safety, and some health care. These services are invaluable to the
people of Alaska. On the national level there would be no major gains
or losses, so no costs or benefits will be assessed. Finally on the
international level there would be a cost to drilling ANWR. This cost
would be a bad environmental record with the rest of the world. The
world oil market and the politics which surround it would be minimally impacted
by a decision to drill, so a minimal, if any, cost can be assessed.
The political ramifications of drilling would be a benefit to the Alaskan
people and a cost to the United States within the world's view of environmental
policy.