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:

          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.