Letters to the Editor

Drilling based solely on profits

Re Terry Munson letter, "Sen. Graham's stance misguided," May 15:

He states, "U.S. dollars are the currency of the world's oil trade, and given current world demand, no serious person believes OPEC will receive fewer dollars if America exploits its modest holdings." Any "serious person" vaguely familiar with "Economics 101" will recognize that if any non-Organization of Petroleum Exporting Countries entity is able to introduce new oil production into the international oil market at any point in time, the global market clearing price will begin to fall.

OPEC has two choices: It can maintain the then current production quantities, and accept the lower prices; or it can curtail the then current production quantities to prevent a fall in the global market clearing price. Either response would result in less dollars for OPEC.

Then he poses the rather stupid rhetorical question: "Will BP, a likely winning bidder for some of these [oil] leases, search for opportunities to help the U.S. consumer?" Munson doesn't understand how our capitalistic system works. BP is not in business to help the American consumer. Its mission statement is to find and implement profitable investments that will provide good financial returns to its stockholders. To the extent it is able make winning bids for oil leases, and then produce new quantities of oil below the prevailing world market clearing prices, then consumers would receive the "fallout" benefits as described in the previous paragraph. But in addition, U.S citizens would also benefit from new revenues to the federal government and the state for upfront payments from BP for the leases, and then ongoing royalty payments for each barrel of oil produced. These payments could be pretty significant; just ask the people who live in Alaska.

The writer lives in North Litchfield Beach.

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