President Bush's call for offshore driling today comes in a four-step package to increase oil production. Step 1: Expand domestic oil supply by allowing drilling in the outer continental shell, asking Congress to lift a federal drilling moratorium on offshore drilling. Step 2: Increase access to oil shale. As sexy as shales are right now, the more shale drilling, the better. Step 3: Permit oil exploration in the Arctic National Wildlife Refuge Will this ever be passed? The ongoing saga continues. Step 4: Increase domestic refining capacity McCain also called for a lift to the offshore drilling ban on Tuesday, leading to Obama's comment that the lift proposal was "short-term political posturing." Obama's tactic is a profits tax on oil companies and investment in renewable energy sources. While such taxes would bring automatic and permanent reductions in gas prices, they would not provide the overall price cut that is needed. Obama's idea is akin to placing a discount on a rare diamond ring. Sure, more people may be willing to purchase the diamond if it is discounted, but what if instead of discounting the diamond, the diamond company sent more explorers to the region where they found the diamond in hopes of finding more rare stones? With more diamonds in supply, there would be more diamond buyers, which would allow the cost of the diamond to be reduced. More production = less demand. Less demand = lower prices.
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