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July 18th, 2008

Oil, Greasing the Gears, Breaking the Bubble?

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It has been a busy week for oil — the first signs of declining prices in the past two weeks have really began to grease the gears of domestic production. On Monday, President Bush revoked an 18-year-old Presidential ban on off-shore drilling, a decision that was quickly muted by Congress, which refused to lift a separate ban that could have spurred production. On Wednesday, the federal government said it would open 3.9 million acres of land in Alaska for drilling in a designated oil reserve.

In what seems like a constant battle between Republican and Democratic lawmakers over domestic oil drilling, one fact remains certain — the US needs to increase domestic oil production. The US produces around 3% of the world’s oil supply, yet consumes 25%, an issue that could be rectified if, according to Senate Majority Leader Harry Reid, the oil companies utilized the millions of unused acres available for drilling. Reid claims oil companies have 68 million acres of unutilized drilling territory. The Majority Leader also said that two years ago the US provided an additional 8.3 million acres for drilling in the Gulf of Mexico, a resource that still remains untapped. Oil companies have continued to refute those claims, claiming that oil production is not substantial in those specific areas.

Yesterday, the House of Representative announced new legislation that would require oil companies to give up leases on unused land before they apply for leases on new territory. The legislation also bans exporting any oil drilled from Alaska, an issue the White House disagrees with, claiming export restrictions will only sour relations with our trade partners who are enduring similar hardships. The White House, which has already threatened to veto the bill, says not allowing oil companies to compete over the land will have an adverse affect on lowering prices.

Despite the controversy surrounding how we need to increase domestic oil production, the fact remains that the US must increase domestic production in order to lower gas prices, and establish a self-sustaining energy independence, hopefully all the while continuing their diligent exploration of alternative fuels and energy.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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