Ending the moratorium on offshore drilling will lower gas prices in the future

Disagree

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by David Thill

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Ending the moratorium on offshore drilling might have a slight impact on gas prices in the short-medium term, but is unlikely to change the price at the pump enough for the average consumer to notice - and no amount of offshore drilling can change the basic equation: there is only so much petroleum under the ground (or the sea). We have already burned all the easily reachable stuff - from here on, it is going to be more and more work to get less and less to market.

Even were the moratorium lifted today, there is a lot of startup cost in locating promising fields, constructing and siting appropriate rigs for the conditions, and successfully beginning extraction. Depending on location, it may be necessary to build significant infrastructure to transport the crude to the nearest refinery with spare capacity.

Refining itself is one of the most significant bottlenecks in the petroleum industry today. Even were crude as easy to find and extract as it was forty years ago, there is very little spare refining capacity anywhere in North America. Refineries are complex, expensive, and require a high degree of expertise. They are required to operate under the highest level of government safety inspection, and even with this close scrutiny, they are dangerous places to work. Like other large infrastructure projects, they are terribly vulnerable to both accident and malicious sabotage. All of these things combine to reinforce the common human tendency towards Not In My Back Yard. Refineries must be sited in a location with access to crude supplies, via sea or pipeline, and the range of possible locations gets smaller every day. Those locations also, unfortunately, tend to be within striking distance of hurricanes spawned in the Gulf of Mexico. Repairing one of these incredibly complex facilities after a hurricane takes time, effort, and of course, huge amounts of money.

Most importantly, offshore oil would only lower gas prices if it ended up being cheaper to extract, refine, and transport to market than Middle East oil, on which North America relies heavily. Middle East oil is of high quality, and compared to offshore drilling, is easily extracted. The infrastructure costs of transporting this crude are decades in the past, and so OPEC can offer a very cheap price when it is in their interest to do so - and they move fast to stifle anything that looks like it might be competition, however feeble.

Ending the moratorium to offshore drilling would have next to no effect on gas prices even once the oil started to flow, after five or ten years. In the long term, the price can only go up unless through conservation, alternate energy, or changes to how we live and work, the demand for this irreplaceable resource is controlled.

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