Backyard Conservative joins the chorus of Illinois Republicans -- along with John McCain and President Bush -- calling for more oil drilling to lower fuel prices:
This is what the American people want: Drill here, Drill now, Pay less--where we have proven reserves!!!
Lift the ban on offshore drilling on the Outer Continental shelf, far from our beaches, but rich with oil. New technology is least intrusive, protecting coral reefs and habitat.
But what effect will offshore drilling have on gas prices? Dean Baker does some back-of-the-envelope calculations:
According to the NYT, the Energy Information Agency estimates that the total amount of oil in the offshore zone in question is about 16 billion barrels. If we assume that it would take about ten years from the day of authorization to get to peak production and that most of the oil is pumped out over 30 years, this would translate into a bit over 1 million barrels of oil a day.
That would be equal to about 1 percent of world production in a decade. If we assume a long-run demand elasticity of 0.3, this would imply a drop in world prices of approximately 3 percent. In today's prices, we would be looking at a drop in the price of a barrel of oil from around $135 to $131. If this were passed on one to one in gas prices (this is long-run story), we might expect to see a drop in the price of a gallon of gas from around $4.00 to around $3.92 a gallon.
The U.S. Energy Information Administration backs up Baker's work. Last year, they released a report suggesting that drilling on the Continental Shelf wouldn’t have “a significant impact” on gas prices until 2030. Even top McCain economic adviser Douglas Holtz-Eakin admitted as much:
Douglas Holtz-Eakin, a senior advisor to McCain’s campaign, acknowledged in a conference call to reporters that new offshore drilling would have no immediate effect on supplies or prices.
Oh, and one more thing: The New York Times reported this morning that "a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply."
The GOP call for offshore drilling is a pander -- plain and simple. Let's hope the press crunches the numbers and presents the facts, just as they did during the gas tax debate back in May.
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