Turmoil in Egypt and fears about a blockade of oil shipments through the Suez Canal are a reminder that America’s energy supplies from foreign sources are insecure and that we face threats of higher prices for gasoline and heating oil which could disrupt meager rates of economic growthand for which we are totally unprepared. Every day we fail to utilize our own domestic oil and natural gas resources is a day that our economy is held hostage to events abroad over which we have little or no control.
Now that Hosni Mubarak has turned control of the government to the Egyptian army, it’s fair to ask: Why does the Obama administration refuse to allow access to domestic sources of crude oiluntapped areas ranging from the Atlantic Ocean, the Eastern Gulf of Mexico to the Arctic National Wildlife Refugethat would enhance our nation’s energy security? An estimated 116.4 billion barrels of crude oil (more than two-thirds of our proven reserves) is on land located underneath the territorial United States and within the offshore areas controlled by the federal government. Those energy resources can safely be recovered with existing drilling technology.
Why not take some of the billions of dollars we’re squandering on Middle East oil and invest it in offshore drilling at home to create jobs for Americans and greater energy supply capacity that would make us less vulnerable to an oil-import disruption?
By reducing our risky over-dependence on oil from overseas, we can put energy security back under our own control. We are now importing more than 60% of the 19.4 billion barrels of oil we consume daily, with a fifth of the imports coming from the Persian Gulf. Last year, we spent $260 billion on imported oil, which represented half of our trade deficit. With oil prices climbing and prices at the pump going north of $3 per gallon, our collective tab this year is likely to exceed $300 billion.
For decades, sharp increases in gasoline prices, as we’re now experiencing and having to dig deeper into our pockets to pay, have usually been followed by economic recessions. That could well happen again as a result of the Obama administration’s policy of over-regulation and taxing of the U.S. oil industry. Mr. Obama has prohibited drilling in onshore areas that already have been leased to oil companies; he has intentionally slowed the issuance of permits to producers for drilling in deepwater and shallow areas of the Gulf; and he has put on hold for seven years drilling in new areas of the Outer Continental Shelf.
As a result, oil companies have moved their drilling rigs to other countries rather than let them remain idle. It would be hard to devise a more unsustainable and counter-productive energy policy.
Those opposed to offshore drilling argue that it’s unsafe. But the BP oil spill at its Macondo drilling site was an isolated event that was caused by that company’s violation of industry norms, for which it should be held accountable. Energy companies have drilled more than 43,000 wells in the Gulf’s shallow and deep waters. It would be a serious error to believe that other energy companies are not capable of learning lessons from the accident and making changes to enhance drilling safety.
Meanwhile, our nation’s demand for energy is growing, and we will need more oil in the years ahead to meet it. According to an ICF International study, developing oil and natural gas resources that currently are off-limits could generate more than $1.7 trillion in government revenue, including $1.3 trillion in offshore tax receipts alone.
Given these facts and President Obama’s attempt to cast himself as a cold-eyed realist, one would think that he would insist on a policy of domestic oil and gas development as part of a long-term commitment to U.S. energy security. But in his attempt to shift Americans to pie-in-the-sky “green” energy sources, that hasn’t happenednor is it likely to anytime soon.
|William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|