Sunday, April 4, 2010

Drill Baby, Drill: a political calculation that will not reduce U.S. dependence on oil

President Obama’s plan for loosening the offshore drilling ban for oil and gas by opening up the southern Atlantic coastline and some other areas to offshore drilling is contrary to his previous stance against offshore drilling.

As reported in the The Washington Times , February 11, 2009, “President Obama blocked offshore drilling plans put in place at the last minute by the Bush administration, including plans to open the national outer continental shelf for drilling.”

What has taken place over the last year or so to change his mind? It is apparent to many that in view of the healthcare debacle his change of heart is based on a view that bipartisan support is needed in order to pass his climate and energy bill. Supporting John McCain’s “Drill Baby, Drill” perhaps more than anything else is a political calculation.

House Speaker Nancy Pelosi (D-California) warned that any offshore or onshore plan should proceed in an environmentally and fiscally responsible manner.

"Taxpayers who own these resources have been historically shortchanged from the huge profits received from drilling on public lands, and must receive a fair return in the future," she said.

And House Minority Leader John Boehner (R-Ohio) dismissed the president's plan as not going far enough in opening up U.S. waters for exploration.

So, apparently, President Obama’s offshore drilling plan is going to meet some stiff opposition.

Two questions that I have that have not been asked:

First, in the United States it seems the most common reason cited for increases in gas and oil prices is our lack of refining capacity. A new refinery has not been built since 1976. So, if that is the case, how is offshore drilling going to be effective without refining capacity?

Second, the Trans-Alaska Pipeline Authorization Act of 1973 was designed to move oil from the North Slope of Alaska to the northern most ice-free port in Valdez, Alaska. The Act required that pipeline oil to be consumed domestically, not exported, and so, it was touted at the time that it would reduce United States gas and oil prices. However, it remains that most of the oil we use is still imported, and the cost at the pump and the cost for heating oil have not eased. Petroleum from the pipeline at Valdez may be refined in the lower 48, but apparently from there, most is exported.

We export Alaska liquid natural gas (LNG) to foreign consumers, even though some have called for a halt to current exports of LNG from Alaska to overseas markets. It has been reported, “If Alaska were prohibited from exporting LNG to overseas consumers, the financial risk associated with any new Alaska LNG facility would increase significantly, because the financial viability of an LNG facility would be tied solely to lower 48 natural gas prices, which are considerably lower than overseas natural gas prices.”

So, in view of President Obama’s offshore drilling plan, the question is, after all is said and done, how will it benefit the United States if we simply export that oil and natural gas to foreign markets?

Even if a bill is passed, it will be years before anything will actually be achieved. Among other things, studies will need to be conducted, and the legislation most likely will get bogged down in litigation. Moreover, after all of that, it does not do one iota to eliminating United States dependence on oil.