Why Off-Shore Drilling is a Terrible Idea

This may put me in a very small minority of Americans, but I think that opening up off-shore oil drilling (including ANWR) is one of the dumbest mistakes we could make as a country. Why?

  1. Opening up currently restricted off-shore areas wouldn’t have an effect until about 2017.
  2. If we started drilling in ANWR today, we’d only get about 1 million barrels of oil per day – about 1/30th of our current daily demand. That won’t do anything to decrease our dependence on foreign oil.
  3. Taking the above two points into account, it won’t do much of anything to reduce prices today.
  4. Most importantly, the hundreds of millions of dollars required to drill a single off-shore well would mean a lot less money for R&D in alternative energy technologies.

Don’t believe me? Take a few minutes to listen to this recent segment from NPR’s Science Friday, with guest Robert Kaufman of the Center for Energy and Environmental Studies at Boston University.

One of the key quotes that stuck with me (emphasis is mine):

People really need to think, whenever they hear about a potential solution, you need to think of the world oil market as one big pool of oil. And whatever happens on one side of the pool literally goes across the entire pool. So when people talk about reducing prices, you’ve got to be able to make the argument that this is going to have a big effect on the global supply/demand balance. For better or for worse, there’s really nothing we can do in the United States on the supply side to move that balance in a significant way.

So, what’s the solution? In the long term, I think it’ll be a combination of many different types of alternative energy. Solar panels on every home, small-scale wind generators, biofuels (hopefully not corn-based ethanol), nuclear, and many other technologies. In the short term, the one thing that we can do right now that will give us the biggest bang-for-the-buck is to conserve. The Negawatt, a term coined by Amory Lovins, can save billions of dollars by not requiring us to invest in new oil wells and power plants to satisfy peak demand periods.

The biggest issue with conservation is that a good percentage of the population is very short-sighted. Instead of investing in an Energy Star rated appliance that will consistently save them lots of money on their electricity bill, they spring for the Walmart special that looks like a great deal. So, I don’t know if the solution is to give people both the sticker price and the total lifetime cost up-front at the time of purchase, or if there’s some other solution (feebates, etc.). In any case, something needs to be done to help people think long-term rather than for the moment.

3 replies on “Why Off-Shore Drilling is a Terrible Idea”

This is off the cuff, but there is some sense to drill drill drill now. It could cause the market to go down via market psych. There would be more Put activity, it’s the futures/options market that controls the price of oil. Though, I do agree it’s a drop in the bucket and far too little too late. Wall Street doesn’t always line up with Main Street.

Okay, I commented before listening to the podcast. Post-listen I find compelling to make note of what was mentioned about the politics of it. The real economics of the situation is probably the most compelling argument for drill or no-drill: They’ll go where the money is. I love that.

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