Oil Drilling and U.S. Energy Policy
About This Event

A mantra from the presidential campaign--"drill, baby, drill"--reflected deep frustration with Washington's decision to lock down tens of billions of barrels of oil under American territory in a period of $4-a-gallon gasoline. Republicans stoked the fire by advocating more off-shore drilling, and Congress recently agreed to lift the long-standing ban. Listen to Audio


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In the aftermath of the presidential election, panelists at this event will take a serious look at the economics and politics of allowing more drilling in the United States and address broader issues related to the development of a sensible national energy policy.

Agenda
8:45 a.m.
Registration and Breakfast
9:00
Welcome:
Robert W. Hahn, AEI Reg-Markets Center
Panelists:
Daniel Botkin, Center for the Study of the Environment
Robert W. Hahn, AEI Reg-Markets Center
Irwin Stelzer, Hudson Institute
Moderator:
Peter Passell, Milken Institute
10:45
Adjournment
Event Summary

U.S. Energy Policy Needs Coherence, Willingness to Tap Domestic Sources


WASHINGTON, DECEMBER 12, 2008--Energy prices reached historic highs this year, with gasoline costing $4 a gallon at the pump. Although oil prices have fallen from $140 a barrel in July to $60 a barrel in December, the debate over whether the government should allow the further development of Alaskan and offshore domestic oil resources remains contentious, encompassing national security, environment, and climate issues. The discussion continued at a December 8 panel at AEI.
 
Daniel Botkin, president of the Center for the Study of the Environment, presented scientific estimates indicating that the proven world reserves of economically recoverable uranium and natural gas, and the number of suitable dam construction sites in the world, are severely limited, while biofuel production is energy inefficient. Therefore, he said, nuclear, hydroelectric, natural gas, and biofuel power should not form the core of U.S. energy policy. He argued that the United States should look more to technologies that are already known to work, such as solar and wind energy. Botkin also argued that the transition costs of switching to wind and solar energy are lower than those for a coal-based energy grid. He concluded that expansion of domestic fossil fuel production in the Arctic National Wildlife Refuge (ANWR) would contribute little energy and is unnecessary besides to sustain U.S. energy needs.

AEI senior fellow and former Speaker of the U.S. House of Representatives Newt Gingrich described the crisis as a political rather than an energy crisis. He argued that due to current investments in the energy grid and the world's abundance of coal reserves, switching to alternative energy requires a "breathtaking investment that isn't going to be made--not in the near future." Instead, he commented, a realistic U.S. energy portfolio must have a prominent role for clean coal, oil and natural gas. He pointed out that European economies, after years of promoting alternative energy sources like wind and nuclear, have begun to promote coal use. Gingrich disagreed with Botkin's assessments of world fossil fuel reserves, arguing that government estimates of economically recoverable oil and natural gas, which rely on static models, historically have been revised upwards. 
 
Robert W. Hahn, an AEI senior fellow and the executive director of AEI's Reg-Markets Center, presented his recent research (with Peter Passell) on the costs and benefits of drilling in ANWR and the regions in the outer continental shelf that Congress recently opened to leasing and development. They found that if production proceeded in both regions, gasoline prices are likely to fall by only around 1 percent but that the benefits of drilling are likely to exceed greatly the costs of drilling, including environmental costs as well as the loss of ANWR's pristine status. They also noted that these net benefits could be channeled to other environmental priorities, such as Everglades restoration.
 
Irwin Stelzer, director of economic policy at the Hudson Institute, argued that the United States should "forget about" independence from foreign oil. He offered instead some points for a sensible U.S. energy policy: that alternative energy cannot substitute for fossil fuels; that the United States should strive to diversify its sources of oil; that the United States should subsidize domestic energy production rather than tax existing fossil fuel–based production; that the United States should offer oil companies with excessive oil inventories tax credits rather than maintain its own costly Strategic Petroleum Reserve; and that clean coal technology should be pursued. Stelzer also recommended that, unless there was a clear instance of market failure such as global warming, the market should be allowed to determine what energy investments the nation should make. He warned that it would be an extremely costly mistake to introduce too many price distortions into the energy markets.

The panel agreed that that the United States should emphasize diverse energy sources and increase energy research and development. There was general support for domestic oil exploration, provided that the benefits would outweigh the costs of doing so.

--POH LIN TAN

For video, audio, and more information about this event, visit www.aei.org/event1839/.

Newt Gingrich is the author of Drill Here, Drill Now, Pay Less: A Handbook for Slashing Gas Prices and Solving Our Energy Crisis (Regnery, 2008). Robert W. Hahn and Peter Passell authored a Reg-Markets Center working paper on domestic drilling and a related op-ed.

For media inquiries, contact Veronique Rodman at 202.862.4870 or vrodman@aei.org.

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