Drill, Baby, Drill

President Barack Obama's decision to open up portions of the U.S. coastline to offshore drilling is a move in the right direction. Proponents of offshore drilling will argue that the proposal does not go far enough, since drilling will be limited to areas south of New Jersey on the Atlantic Coast, certain sections of the Gulf of Mexico and the north coast of Alaska. Critics will argue that the decision will increase the U.S.' carbon footprint and dependency on fossil fuels and contribute to global warming. But the decision reflects reality. Fossil fuels will continue to be an important source of energy for the U.S. economy over the next several decades as global economies gradually shift to cleaner, renewable sources of energy.

Increasing U.S. domestic petroleum will not likely lower world oil prices--most experts believe that U.S. oil reserves are small in relation to the rest of the world. But it will help the U.S. offset the negative economic impact of a large increase in oil prices. For example, the economies of Alaska and Texas fare much better than non-energy producing states when oil prices rise by 50% or 100%. Oil- and natural-gas-producing states experience smaller increases in unemployment and a smaller decline in non-farm employment during a peak oil shock. The reason for this is simple; the size of the energy sector expands during a period when oil prices rise while the rest of the economy shrinks. The growing energy sector helps prop up other areas in the economy by increasing the demand for goods and services in non-oil industries.

The U.S. needs a comprehensive energy program to bridge the country's adjustment to cleaner fuels that reduce carbon emissions. This includes green energy and nuclear energy, as well as clean coal, oil and natural gas.

The prospect for increasing domestic fossil fuel production is much brighter for natural gas than conventional oil. Hydraulic fracturing, a new technique for extracting natural gas from shale rocks, led the Potential Gas Committee to increase their estimate of American natural gas reserves by 35% over the past couple of years. A more recent private sector report argues that shale gas more than doubles America's natural gas reserves.

Another possible way to increase domestic fossil fuel production is to expand drilling on the public lands where many believe there are significant oil and natural gas deposits. Some energy experts believe that there are significant pools of oil and natural gas in sections of the Gulf of Mexico or off the coast of California, areas where offshore drilling is still prohibited. The U.S. should take advantage of more offshore oil and natural gas drilling and exploration opportunities. The U.S. could probably increase its fossil fuel production by 20% or 30% over the next decade through a combination of oil and natural gas. This could create jobs and help these states better cope with future spikes in oil prices. If we do not drill offshore, it is possible that foreign countries could drill off the continental shelf for their own benefit. To the extent that the U.S. can switch from oil to natural gas as a source of energy, this will reduce carbon emissions as natural gas is a significantly cleaner fuel.

The U.S. could possibly even reduce its imports of fossil fuels by increasing domestic energy production, a political objective of both Democrats and Republicans. At the very least, the U.S. should be able to slow down the growth of fossil fuel imports, which contributes to its trade deficit. The extent to which the U.S. can reduce its oil imports will also depend on building nuclear power plants that can replace oil and coal generators that account for nearly 75% of U.S. electrical power.

President Obama's decision to reduce offshore drilling restrictions is an important move in the right direction. The U.S. needs a comprehensive energy program to bridge the country's adjustment to cleaner fuels that reduce carbon emissions. This includes green energy and nuclear energy, as well as clean coal, oil and natural gas. By adopting a broad "do it all" type energy program, the U.S. can move toward its political objective of energy independence that will also help reduce the country's trade deficit.

Marc D. Weidenmier is an adjunct scholar at AEI.

Photo Credit: Flickr user arbyreed/Creative Commons

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