Offshore drilling: A pointless political gesture

Over the last few days the blogosphere has been chewing over Obama’s offshore drilling plan and the general consensus is that, well, its a complete waste of time.

The drilling will not reduce gasoline prices nor will it reduce America’s dependence on foreign oil.

That is not to say that the pundits are not impressed by the audacity of the move. The Wall Street Journal called it “something of a master stroke” that was “almost Clintonesque in its brilliance.”

Yet you could argue it was almost Bart Simpson in its stupidity.

It gives the impression of tackling the coming energy crisis, when it won’t. It gives the impression of reducing foreign oil, when it won’t and finally it won’t reduce your gasoline bill either.

Take the foreign oil argument. As the Baltimore Sun points out: “There has been much discussion about offshore oil drilling as a means to reduce our dependence on foreign oil. What is often ignored is the fact that offshore oil will be almost certainly be more expensive than the foreign oil we are currently buying.”

The paper makes the old Chinese toys comparison. When you are buying a toy, do you buy an expensive American one or a cheaper Chinese import? Well, you know the answer, even if you don’t want to admit it.

The comparative cost of extracting oil from the Middle East is much smaller than deep off-shore America. That’s the bottom line.  And don’t forget we are talking deep offshore , where the costs have a tendency to rocket.

If you are going to subsidize offshore oil to make it cheaper for American tax-payers, then the renewable industry will, quite rightly, up in arms complaining about unfair subsidies.

So what about reduced gasoline prices and taxes? As the New York Times has pointed out: “even the most optimistic projections concede that the amount of petroleum we’re talking about here is relatively minor; and while some jobs may be created fairly quickly, profits (and tax revenues) are going to come slowly.”

The paper projects that, given the record of the oil industry in the US, “we might get production of as much as one million barrels a day of oil from these newly released areas, but only after 10 to 15 years of effort.”

The paper argues that American tax-payers may make, eventually, some $10 billion a year in taxes, and no more than $25 billion.  But this could be decades down the line. It could not happen at all, either.

But before you get too excited about future oil royalties and tax income, maybe you should think about current incomes. Oil companies are notorious at lobbying to get tax reductions and loop-holes so they do not pay tax.

The oil companies currently owe the American tax-payers up to $50 billion in unpaid taxes from current drilling and yet they are now being offered new areas for drilling.

If someone owed you $50 billion would you give them more credit or would you ask for your money back first? I think you know the answer to that one too.

And so oil industry critics have come up with a novel – but hardly revolutionary plan.

Representative Edward J. Markey of Malden plans to introduce legislation next week to force companies such as ExxonMobil and Shell to begin paying on those existing leases as a condition of obtaining new ones.

“What most people don’t know is that under a poorly drafted law in the 1990s, oil companies [that] received leases between 1996 and 2000 in the Gulf of Mexico are now drilling on public land for free,’’ said Markey, chairman of the House subcommittee on Energy and Environment. “As oil prices are high and rising, this is an outrage and something that is completely unjustifiable’’.

Not surprisingly, the oil industry says it plans to fight efforts by Markey and others to claw back royalty payments.

So Obama’s plan is being dismissed as a “public relations” stunt that is trying to appease the Republicans, but will “ leave Americans facing the daunting reality that they must learn to consume less, not more, of the one substance they have grown so overwhelmingly dependent on.”

If this is so, Obama is playing a dangerous game. He is gambling with America’s coastline for political gain.

Its not as if his advisers will not be aware of the risks of offshore drilling and ships sailing close to shore. All you have to do is look at the recent grounding of a tanker on the Great Barrier Reef in Australia to understand the risks that oil and water don’t mix.

So it seems the blogosphere has given a resounding thumbs down to Obama’s announcement. And, as one columnist in the Globe and Mail points out: “You can drill all you want, but what you’ll find won’t keep you on the road.”

You might just stay in the parking lot.