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Drill, Maybe, Drill

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Posted on April 5 2010 5:45 am
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by Rich Trzupek

The Obama administration opened up some of the nation’s shores to offshore drilling on Wednesday, a move that seemed more political than practical. Ironically, environmentalists and conservatives inadvertently found common ground when criticizing the plan: it won’t do all that much to create true energy independence. Senate minority leader Mitch McConnell praised the move, but qualified his support by noting that it was “a small one that leaves enormous amounts of American energy off limits.” Sierra Club Executive Director Michael Brune felt much the same way, for different reasons of course, saying that “drilling our coasts will [do] nothing to lower gas prices or create energy independence.”

Obama opened up offshore drilling along much of the Atlantic coast and in the Cook Inlet in Alaska. The drilling ban remains in place along the Pacific coast and most of Alaska, while more drilling in the Gulf of Mexico remains under study. Accordingly, this is merely a partial measure, as both McConnell and Brune imply. But, Brune’s assertion that more drilling will do nothing to lower gas prices is likely incorrect. Gas and oil prices depend in large part on the futures market and the prospect of more supply down the road, even a little more, will help to depress futures prices. Back in 2008, when gasoline prices were over four dollars per gallon, president Bush moved to open up offshore drilling. That announcement had the desired effect. Gasoline prices dropped, not because there was an immediate increase in supply, but because the market responded to the prospect of increased supplies down the road.

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