Much Ado about Offshore Drilling
The lead story in today’s papers and the buzz on the political talk shows is about President Bush’s request to Congress that they suspend the federal ban on oil drilling off the U.S. Atlantic and Pacific coasts.
Already, drilling proponents and environmentalist opponents are gearing up for battle, and the presidential candidates are sounding off on the idea. None of their comments, so far, offer anything useful for public policy.
For people who want good policy, here are some points to consider:
- Part of the reason for the high current price of oil (and gasoline) is that supply is “inelastic” – that is, it’s hard for producers to increase production even when prices are high and there is significant economic incentive to do so. A significant increase in production capacity would reduce oil and gas prices significantly — assuming the current condition of high inelasticity continues until the new oil is brought to market.
- It will take a long time for that new oil to reach the market. It often takes as much as a decade or more for a new oil field to be brought online.
- No one knows how much oil lies offshore and whether that oil is economically worthwhile to extract, as there hasn’t been any extensive studies of those areas in decades.
- Concerns about the environmental impact of drilling are legitimate, as are concerns that the United States may be forgoing the use of a valuable resource by not drilling in these areas.
Good public policy would examine the risks and costs underlying both of these concerns, and then make a decision (or perhaps a compromise) about drilling. However, this issue will not be decided in such a rational way. The debate will be dominated by two ideological camps — the “drill at any cost” crowd and the “don’t drill at any cost” crowd” — and their ideological priors and political power will preempt any good policy discussion.
Unfortunately, that’s how we roll here in Washington, D.C.
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