How #DrillBabyDrill Turned into a Nightmare for Big Oil

How #DrillBabyDrill Turned into a Nightmare for Big Oil

In 2008, John McCain and Sarah Palin ran on one single slogan: drill, baby, drill, and no state has been more brazen about increasing oil production than the Republican crown jewel of Texas. They should have been careful what they wished for.

Despite all the propaganda Republicans have spread about President Obama being against domestic energy production - they really mean oil production - though, the reality is that the United States has nearly doubled its oil production since 2008. Largely because of this increased American production and President Obama's ingenious efforts to reduce our dependence on carbon-based energy, gas prices have been falling precipitously, and the Energy Department estimates average gas prices to be around $2.60 a gallon this year.

Now, that means really good things for the American economy and the American consumer: in 2015, this will mean that American consumers will have an extra $60 billion to spend elsewhere.

Great news for America is, as usual, bad news for Texas. With some analysts predicting oil's downward spiral may not stop until it gets to $20 a barrel, the crude reality of 'drill, baby, drill' is setting in on the lone star state. Last month, JP Morgan warned that should oil prices keep falling, Texas may be headed for a recession as the rest of the country heads for a boom.

The nation’s biggest bank has raised the possibility that Texas could tumble into a regional recession next year if oil prices remain cheap.

That’s because some of the economic features that fueled the mid-1980s oil bust are strikingly similar to the way things are in modern-day Texas, now the biggest U.S. oil-producing state after a surge of shale hydrocarbons, says JPMorgan Chase & Co.

JP Morgan's Chief Economist summed up the reason:

Discount oil will lift the U.S. economy, as lower gas prices give consumers more purchasing power, but in Texas, “oil is a fair bit more important than gas,” Feroli said.

The fear is not only that the dropping oil prices will cut into the profits of the mega oil corporations in Texas, but also that these companies may shut down productions in certain wells that are less profitable at lower prices, increasing unemployment by 128,000 in the American secession movement's homeland even as lower gas prices fuel a million new jobs in the rest of the country.

When it comes to domestic carbon based energy production, Texas' interest - the oil industry's interest - lies 180 degrees apart from the interest of the United States. Texas does better when the rest of us struggle at the pump, and it does poorly when we get a break from it. Despite what its politicians pretend on TV, the oil industry isn't interested in lowering energy prices for the American consumers. Just the opposite, their interests lie in high cost of energy.

Even those who believe that Texas will survive the oil slump without an economic downturn concede that other sectors will have to step in to save Texas' huge ass while oil (proverbially) burns.

But how did this happen, you might ask. Is the oil industry that stupid? Are conservatives that dumb that they do not realize the basic workings of a market economy - that if you increase supply and demand does not increase correspondingly, that prices will fall?

Firstly, "drill, baby, drill" was primarily a way to poke fun at those concerned about long term climate change due to rising levels of carbon as well as at the president who has made clean energy and energy efficiency a priority.

What Republicans and their oil buddies too busy playing politics did not understand is that Barack Obama was able to fundamentally change the behavior of the American energy consumer. He was assisted in this by high gas prices - ironically, the reason his political opponents had hoped "drill, baby, drill" would catch on - but that wasn't all. During the restructuring of the American auto industry shaped by the President's administration, fuel efficiency became a big deal. Automakers shed the Hummer and picked up the Volt. Cash for clunkers took nearly 700,000 gas guzzlers off the streets and replaced them with fuel efficient vehicles, but that wasn't its lasting impact - the lasting impact was to refocus manufacturers on fuel efficiency and get the ball rolling on consumer demand for them.

The president didn't stop there, of course. In 2011, he announced new mileage standards for automobiles with the goal of 54.5 miles to the gallon by 2025, and last year he took it a step further by applying fuel standards to heavy duty trucks for the first time ever.

That is just the cars and trucks on the road. The president's stimulus (remember that?) made unprecedented investments in renewable energy and simultaneously funded energy efficiency and conservation in homes. Solar energy production alone has grown 12-fold since President Obama took office, and a million homes were weatherized under assistance from the Recovery Act alone.

To cap it all off, President Obama did yet something else thought impossible by the provocateurs and energy industry experts: he brought China on board on a concrete plan to reduce carbon emissions late last year.

The cumulative effects of all of these things have been to systematically and deliberately reduce Americans' reliance on oil and gas even as their domestic production has been shooting up, and with fierce competition from the Americas, OPEC has been refusing to cut productions enough to keep gas prices high.

In other words, President Obama has systematically and deliberately taken the GOP's Texas oil-centric mantra "Drill, Baby, Drill" to heart, and then made it come back and bite them in their Texas size butt.

While I am sympathetic to the workers who stand to lose their jobs, forgive me for not feeling too badly about Texas' predicament. This is the state that has produced the most virulent opponents of clean energy, and served as the capital of home-grown secessionist domestic terrorist movement. So seeing the state get hoisted on its conservative movement's own petard doesn't exactly make me shed tears.



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