To drill or not to drill

An alternative take on the oil issue

By MORTON PAGLIN

article created on: 2008-10-01T00:00:00

In a previous issue of the Jewish Review, Robert Horenstein presented some popular views on offshore drilling and the energy crisis that I believe are wrong.

Consideration of the costs and benefits of alternative strategies shows a better way to sever our dependence on foreign oil and speed the transition to non-carbon energy sources.

DUBIOUS ARGUMENTS
AGAINST DOMESTIC DRILLING

1. Increasing domestic production will reduce the world price of gasoline only by four cents a gallon.

Answer: True, but that is only part of the story.

Lower-cost oil means lower prices for the jet fuel and diesel oil used in transportation and agriculture, which in turn will lead to lower prices for food and most other goods.

Moreover, money now paid to foreign suppliers would go to U.S. companies to invest in domestic extraction—increasing employment and wages, federal and state taxes, and dividends to millions of individuals, pension funds, and college endowments.

2. Since some of the oil produced in Alaska goes to Japan, drilling there would not make us more energy independent.

Answer: In a crisis, we have every right to divert this oil to domestic uses, and would do so. Revenues from exports to Japan offset part of our payments to foreign suppliers.

3. We are addicted to oil, so we shouldn’t drill if we want to break this addiction—we can’t drill our way out of it.

Answer: Oil is just another intermediate good—it’s not like an addictive drug.

Consumers react rationally to rising gas prices by shifting to more fuel-efficient cars or driving less; addicts don’t behave that way.

Prohibiting offshore drilling means foregoing oil and gas with a market value of more than a trillion dollars. We can have a greater effect on our “oil addiction” by raising taxes on gasoline and using the revenues to subsidize alternate energy sources.

Policies to encourage use of green energy can best be pursued when added income is flowing in from coastal oil and gas sales.

SOLUTIONS TO
THE ENERGY CRISIS


1. Tap our oil and gas supplies


We spend $700 billion a year buying oil and gas from hostile countries that have funded terrorists. These petro-dollars have been used to buy controlling interests in U.S. companies.

While we sell off our capital stock and pay billions in dividends and interest for foreign oil and gas, we are neglecting supplies we have in our own backyard.

The decline in domestic production has been accelerated by a 27-year federal drilling ban in offshore waters and in the Alaska National Wildlife Area Refuge (ANWAR).

The Alaskan pipeline will soon be useless, because with falling production from existing sites, pressure will drop.

Directional drilling in a desolate area the size of three football fields would allow us to tap the large oil reserves in this wildlife preserve of over 19 million acres.

Sending this ANWAR oil through the pipeline could replace 30 years of imports from Saudi Arabia.

Transporting our own offshore oil through pipelines is actually cleaner than the alternatives.

Drilling technology has been revolutionized in the last 15 years. During fierce hurricanes no oil has spilled from rigs in the Gulf of Mexico.

Analysis of oil in the oceans shows that more than 40 percent is natural seepage from the ocean beds; only one percent comes from oil rigs. The remainder spills from oil tankers and leaks from other freighters.

Offshore oil and gas could come online in two years if we pass a law limiting endless court appeals.

Using offshore oil would allow us to phase out corn-based ethanol, a costly environmental disaster that has reduced food supplies and—through fertilizer runoff—created large dead areas in the Gulf of Mexico.

2. Use nuclear power

The fastest way to reduce greenhouse gases is to build nuclear power plants to replace coal-fired generators, which produce 57 percent of our electricity.

France gets 80 percent of its electricity from nuclear plants—and without a single fatality.

By enriching and reusing uranium, France can store 40 years of radioactive waste in an average size room.

Compare their safety record with thousands of deaths and millions of lung-disease cases from mining and burning coal.

Using a standardized design for all nuclear plants, we could in the next 20 years reduce CO2 emissions to below levels specified in the Kyoto Accord, and more quickly than with wind power, which requires huge investments in transmission lines.

Morton Paglin is an emeritus professor of economics, Portland State University