Wednesday, August 20, 2008

Oil, natural gas & America’s well-being

Here’s today National Review Online editorial. I hope you read it all.

Congress suffers from a crude sense of timing when it comes to oil. When it was time to act, it did nothing for decades. Now it’s desperate to be seen doing something at the precise moment when the time has come to do nothing.

On October 1, the congressional ban on extracting oil from the 1.76 billion acres of the Outer Continental Shelf will expire. The ban has been renewed annually for decades. If Congress simply does nothing, the ban will expire, uncorking significant new supplies of oil and gas, and sending a message to world energy markets that the game has changed.

Unhappily, a bipartisan group of senators calling itself the Gang of Ten is pressing for a different approach, one which will do little or nothing to expand the supply of oil, reduce prices, ameliorate environmental problems, or diminish America’s consumption of oil extracted from beneath the boots of despots.

The Gang of Ten has christened its approach the New Energy Reform Act, or New ERA (get it?). But the content of the proposal is decidedly Old Era: billions of dollars in new corporate welfare for automakers and other politically influential industries, new restrictions on oil trading and financial markets, and a gigantic tax increase on oil and natural-gas producers — most of which will be passed on to consumers in the form of higher prices for gasoline and household utilities.

What’s missing from the Gang of Ten plan is anything that will put more oil on the market.(emphasis added)

The plan calls for a permanent ban on drilling in most of the OCS in exchange for allowing four states — Georgia, Virginia, and the Carolinas — the option of approving new oil leases off their shores. Way off, in fact: No drilling would be allowed within 50 miles of the coast.

Which is to say, even if the legislatures in those four states approved drilling — and who knows if or when that would happen — most of the OCS would remain off-limits. A little new acreage would be opened in the Gulf of Mexico by reducing Florida’s current 125-mile buffer zone to 50 miles — but even that comes at too high a price: a ban on new production in the Pacific. Beyond these crumbs, it’s more of the old familiar: biofuel subsidies and ethanol giveaways (leaving us with pork-fed corn instead of corn-fed pork).

How much oil are we talking about here? Conservative estimates put the yield of the OCS at 19 billion barrels of oil — as much oil as we’d import from Saudi Arabia in 35 years at our current rate. Also 84 trillion — that’s with a “T” — cubic feet of natural gas, or enough to meet the energy needs of 80 million households for 15 years.

Putting a bunch of new oil on the market is a lot more likely to lower prices than is throwing billions of dollars at phantom technologies, as the New ERA plan calls for doing, or slapping oil producers with punitive new taxes. Lifting the drilling ban is a realistic and responsible alternative.