Monday, July 21, 2008

High Gasoline Prices and Offshore Oil Drilling

Congress is under pressure to do something, anything, to lower +$4 per gallon gasoline prices. The partisan debate has locked onto offshore oil drilling, limiting speculation and utilization of onshore federal lands as the solutions to high prices. Congress knows the public has a way of reducing its own anxiety by replacing its member of Congress. This will not solve the problem but it does inspire Congress to do 'something, anything.' And that is really scary.

The Republicans proposed a "find more, use less" bill known as the Gas Price Reduction Act of 2008, which includes deep-sea exploration more than 50 miles off coasts of the states that want it, lifting a ban on development on oil shale deposits in western states, increased incentives for the development of plug-in electric cars and trucks, and guards against excessive speculation.

The Democrats proposed a "use it or lose it" bill that would force the oil companies to use the offshore oil leases they already have [estimated at 68 million acres]. Critics point out that this approach makes three invalid assumptions: 1) That Big Oil would ignore these areas during record gasoline prices, 2) That every lease represents a guarantee of oil, and 3) That areas not producing or not being drilled are inactive. Oil fields require up to 12 years to come on line so not only will they not lower prices soon, but it is also hard to tell what areas will be productive. (The Wall Street Journal, The Washington Post, The Washington Times)

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