Offshore Drilling
I have the following theory about the fallacy of opening offshore areas of the US coastline to drilling as a strategy to push down oil prices:
- Any additional crude oil that could be recovered from US offshore areas does materially not increase OUR oil supply.
- Regardless of whether the firm drilling for such crude is ExxonMobil, Chevron or any other US firm, it would simply become part of the WORLD crude supply and would be sold at whatever the spot price for crude is on a given date.
- Such crude would NOT be sold preferentially to US citizens at a discount but rather at the going price. The fact that it is locally produced may translate into a slight reduction in transport costs (over Venezuela, Mexico, Canada and other nearby oil-producing regions). But, the reality is that the difference at the pump for US consumers would be inconsequential.
- Yes, by increasing the WORLD supply of oil, the price of crude will drop some, but the amount we are talking about here is relatively small (and the effect on price at the pump likely would be even smaller). And that effect is years off.
- The primary effect of drilling offshore would be to increase the amount of product that US oil companies could sell, in other words increase their sales and profits.
- Moreover, drilling offshore would undermine the battle against climate change. Rather than accelerate the pace of drilling, we should encourage US energy firms to invest in alternative energy sources.
