Offshore Drilling vs. the economic sweet spot?
Today, President Obama announced his proposal to open over 167 million acres of ocean to offshore drilling.
The President’s plan would end the 20-year moratorium on drilling along most of the eastern seaboard and the eastern gulf coast. It would also open up offshore drilling areas in Alaska, notably excluding Bristol Bay to preserve its fishing industry.
The response to the President’s announcement was mixed:
- In Alaska, local newspapers praised this move by the President, calling it “both aggressive and pragmatic”
- In Maryland, bloggers were concerned, siting negative impacts of offshore drilling on tourism in their state.
- The Heritage Foundation took a page from the FoxNews book today by being supportive of the President’s announcement and at the same time critical of President Obama’s decision-making process.
- Greenpeace is ticked-off
In his announcement, President Obama references a strategic purpose for this increase in offshore drilling. But, he then rapidly adds that drilling cannot realistically satisfy out long-term energy needs. Which leads to the question…What is the President’s plan? If it’s a drive toward energy independence and clean energy, how does this decision help in the drive toward a sustainable energy future?
While I wish that our country could use clean and domestic resources for its energy needs, reality is that over 95% of our transportation sector is fueled using oil – and we don’t have enough blue barrels coming out of the ground each day to meet this demand. Today, two-thirds of our oil consumption is used for transportation and two-thirds of our oil supply is imported from other countries – hundreds of billions of dollars a year. These are daunting numbers. These volumes cannot be replaced by domestic supplies of fuel in the near-term. I agree with the President – we need a long-term strategic plan.
Today, the NY Times ran a piece on the economic sweet spot that oil prices now find themselves in. The ~$80 per barrel price on light, sweet Texas crude (oil) that we’ve maintained in recent history has found a precious balancing point between alternative fuel RD&D and traditional fuel use. The price is just high enough to allow for reliable research funding, but is low enough to avoid widespread negative economic impacts.
Will increased offshore drilling be an effective step on the path to energy sustainability and independence? Or will new wells push the price of oil out of the economic sweet spot, unsettling the balance between traditional fuel production and alternative (cleaner) fuel RD&D?