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Offshore drilling deception

By WILLIAM C. DANVERS, UPI Outside View Commentator   |   Aug. 12, 2008 at 11:41 AM   |   Comments

WASHINGTON, Aug. 12 (UPI) -- Sheik Yamani, a former minister in the Organization of Petroleum Exporting Countries, famously said, "The Stone Age didn't end because we ran out of stones." The same could be said of our oil-driven economy: The Oil Age will not end because we will run out of oil. It will end because the supply-demand equation will force changes from oil to its alternatives.

This makes the zeal for increased U.S. offshore drilling beyond what is presently available more political than practical and more of a ploy than a policy. The Energy Information Agency in the U.S. Department of Energy wrote in its Annual Energy Outlook 2007 that "projections in the OCS (Outer Continental Shelf) access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030."

Those who have switched their position and become aggressive advocates for drilling on the OCS say they are doing so because of changed circumstances. While circumstances have changed, those who view OCS drilling as a short-term panacea to high energy costs should heed the other warning in the EIA 2007 report. "Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant," the report said. In a paper he wrote for the University of California Energy Institute in June 2008, Severin Borenstein of the University of California, Berkeley, adds: "Oil prices are set based on the balance of worldwide supply and worldwide demand. That means that additional production of oil in the United States has effectively no more benefit to U.S. consumers than production in any other part of the world."

In addition, there are other factors that are driving prices up that are not directly connected to increasing U.S. production. In the same paper, Borenstein discusses the political problems interrupting supply. "Due to government mismanagement and internal conflicts, Mexico, Venezuela, Nigeria, Iran and Iraq, for instance, have seen (oil) production drop," Borenstein writes. No amount of OCS drilling could alter the supply problems that these disruptions create.

One of the biggest reasons prices are spiking is the falling dollar. Daniel Yergin of Cambridge Energy Research Associates, in testimony before Congress earlier this year, wrote, "Instead of the traditional 'flight to the dollar' in a time of instability, there has been a 'flight to commodities' in search of stability during a time of currency instability and a falling dollar. We believe that this trend -- a falling dollar contributing to higher oil prices -- is very strong." Dollar devaluation is not linked to offshore drilling. Implementing sound economic policies, which would strengthen the dollar, is an effective tool for lowering oil costs.

Just as important, and too often ignored by the offshore acolytes, is how to respond to climate change. One of the important causes of severe weather patterns, rising food costs and, of course, pandemic pollution problems is climate change, which is linked to oil consumption and our exponentially growing global carbon footprint. High oil costs are a symptom of our flawed approach to energy and climate change. At present price levels, looking to alternative, renewable fuel sources is not only better for the environment, but also makes sense economically.

The drilling debate is a useful prism through which to view the issue of what to do about energy prices. There is clearly a need to help low- and middle-class consumers, farmers, truckers and others for whom oil is not a luxury but a lifeline. Releasing oil from the Strategic Petroleum Reserve and offering subsidies are two short-term solutions, but a long-term plan must be developed and aggressively implemented. Comparisons between a new energy policy and our effort to land a person on the moon are not adequate. We need something more like the New Deal to respond to a crisis that affects our entire economy, to say nothing of the environment.

The next administration needs to respond to the very real concerns that working men and women have in the United States as a result of skyrocketing energy costs. But it would be a disservice to offer up gimmicks like expanding OCS drilling as the solution when it simply will not improve people's lives. Drilling may have to be part of a broader debate, but it, as well as all other options, must be viewed realistically. Tradeoffs have to be considered, and the path forward well reasoned. This issue is too important for pandering.

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(William C. Danvers served on President Clinton's National Security Council staff. He is currently a lobbyist in Washington and an adjunct professor at George Washington University.)

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(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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