29 Aug 2008

Is Offshore Drilling a Realistic Solution?

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Like playing with a canker sore, I can’t help checking out the Env-Econ blog. In a recent post, John “I’m funny enough to compensate for my tree-hugging views” Whitehead was urging his readers to go vote against offshore drilling in a poll hosted here. Now if you click that link and check out the context, you will see some amazing objections to offshore drilling:

* It will be 10 years before oil will start to be pumped into refinery pipelines, from the point the exploring begins.

* Oil will start being pumped out in 10 years, but maximum capacity isn’t expected to be reached until 2030.

This is irrelevant, as I explain in this post. If producers with current excess capacity (such as Saudi Arabia) anticipate greater competition down the road, they will pump more now. This seems to be what happened just recently, when oil prices started dropping the DAY that President Bush lifted the executive moratorium on offshore drilling.

* As the oil is pumped from these new leases, it will just be auctioned off into the global market, and the highest bidder will buy the oil. It will not be set aside solely for Americans, unless we are planning to change the way we participate in free global markets.

Oh my gosh, somebody help me back into my chair… Did they really just say that? Global demand curves slope downwards. If you throw more oil on the global market, the global price of oil goes down, meaning Americans pay less for their imported oil. The really ridiculous thing is, suppose they did pass a law requiring any new production to be sold to Americans. That would simply lower Americans’ demand for imported oil, which would lower the world price, which would redirect some of the previously imported oil to the highest bidders elsewhere in the world. Good grief, if you don’t know the first thing about economics, why are you setting up a website making economic “points”?!

* Even though the [Gang of Ten] plan projects to raise $84 billion for alternative energy projects, drilling in these off-limit areas will risk serious environmental damage to our coastlines.

This is great, and this is just what the Gang of Ten was supposed to accomplish. Now we’re arguing not over “offshore drilling” but rather the piddly little concessions offered in the Gang of Ten plan. The plan doesn’t call for revoking the federal ban, instead it calls for renewing the ban, and then allowing four coastal states the right to opt out of it (if their state legislatures so vote), BUT no matter what, even these four coastal states still can’t drill anywhere within a 50-mile buffer zone off their shores.

And anyway, what are we afraid of? I thought the evil oil companies were sitting on 68 million acres of leased land where they weren’t drilling. So why would they start drilling offshore if they were given the green light?

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