Samuelson on OIl Drilling

http://www.realclearpolitics.com/articles/2008/04/start_drilling.html

Article Highlights (well, almost all of it is a "highlight"):

(...) The truth is that we're almost powerless to influence today's
prices. 
We are because we didn't take sensible actions 10 or 20 years ago. If we 
persist, we will be even worse off in a decade or two. The first thing to 
do: Start drilling.
It may surprise Americans to discover that the United States is the 
third-largest oil producer, behind Saudi Arabia and Russia. We could be 
producing more, but Congress has put large areas of potential supply 
off-limits. These include the Atlantic and Pacific coasts and parts of 
Alaska and the Gulf of Mexico. By government estimates, these areas may 
contain 25-30 billion barrels of oil (against about 30 billion of proven 
U.S. reserves today) and 80 trillion cubic feet or more of natural gas 
(compared with about 200 tcf of proven reserves).

What keeps these areas closed are exaggerated environmental fears, strong 
prejudice against oil companies, and sheer stupidity. Americans favor both

"energy independence" and cheap fuel. They deplore imports -- who wants to

pay foreigners? -- but oppose more production in the United States. Got
it? 
The result is a "no-pain energy agenda that sounds appealing but has no 
basis in reality," writes Robert Bryce in "Gusher of Lies: The Dangerous 
Delusions of 'Energy Independence.'"

Unsurprisingly, all three major presidential candidates tout "energy 
independence." This reflects either ignorance (unlikely) or pandering 
(probable). The United States now imports about 60 percent of its oil, up 
from 42 percent in 1990. We'll import lots more for the foreseeable
future. 
The world uses 86 million barrels of oil a day, up from 67 mbd in 1990. 
(...)

The best we can do is to try to influence the global balance of supply and

demand. Increase our supply. Restrain our demand. (...)

Increasing production also is important. Output from older fields,
including 
Alaska's North Slope, is declining. Although production from restricted 
areas won't make the U.S. self-sufficient, it might stabilize output or
even 
reduce imports. No one knows exactly what's in these areas, because the 
exploratory work is old. Estimates indicate that production from the
Arctic 
National Wildlife Refuge might equal almost 5 percent of present U.S. oil 
use.

Members of Congress complain loudly about high oil profits ($40.6 billion 
for ExxonMobil last year) but frustrate those companies from using those 
profits to explore and produce in the United States. Getting access to oil

elsewhere is increasingly difficult. Governments own three-quarters or
more 
of proven reserves. Higher prices perversely discourage other countries
from 
approving new projects. Flush with oil revenues, countries have less need
to 
expand production. Undersupply and high prices then feed on each other.

But it's hard for the United States to complain that other countries limit

access to their reserves when we're doing the same. If higher U.S. 
production reduced world prices, other countries might expand production. 
What they couldn't get from prices they'd try to get from greater sales.

On environmental grounds, the alternatives to more drilling are usually 
worse. Subsidies to ethanol made from corn have increased food prices and 
used scarce water, with few benefits. If oil is imported, it's vulnerable
to 
tanker spills. By contrast, local production is probably safer. There were

4,000 platforms operating in the Gulf of Mexico when hurricanes Katrina
and 
Rita hit. Despite extensive damage, there were no major spills, says
Robbie 
Diamond of Securing America's Future Energy, an advocacy group.

Perhaps oil prices will drop when some long-delayed projects begin 
production or if demand slackens. But the basic problem will remain.
Though 
dependent on foreign oil, we might conceivably curb the power of foreign 
producers. But this is not a task of a month or a year. It is a task of 
decades; new production projects take that long. If we don't start now,
our 
future dependence and its dangers will grow. Count on it.


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