Why McCain's "Drill Here, Drill Now" Proposal Fails the Supply/Demand Reality Check

There were two reasons why the Truth-O-Meter at CQ Politics gave a "FALSE" rating to John McCain's "drill here, drill now" proposalfor reducing oil prices: supply and demand. The impact on supply, achieved years after oil companies greenlighted any new development projects, would be at most "a couple of hundred thousand barrels a day" or about the same amount that Saudi Arabia promised to add in the next few months. That's well below 1% of today's global production. The impact on satisfying new demand, driven primarily by economic growth in Asia, would be nothing more than a rounding error. McCain's rhetoric on global oil, like the mainstream media narrative, seems stuck in the mid-1980s, when the U.S. produced as much oil as Iran, Iraq, Kuwait and Saudi Arabia combined.

Things were far simpler in 1986, when Saudi Arabia racheted up its oil production to 5.2 million barrels a day, up from 3.6 million daily barrels in 1985. Oil nosedived from $28 a barrel in 1985 to $15 a barrel a year later. But those days, when our good friends the Saudis could easily turn on the spigot to change the supply/demand balance, are long gone. To understand oil prices today, you need look beyond the U.S. and the Persian Gulf, to places where the U.S. has limited influence, places like Nigeria and China and Mexico.

And until we start dealing with the basics of global supply and demand, our political dialogue will be clouded with more empty rhetoric..........................