Hilzoy
criticizes John McCain for asking congress to work overtime to "solve" the "energy crisis". This misses the more important point, which is that John McCain is dead wrong. He couldn't be wronger if he were wearing white shoes and pants after Labor Day--in a coal mine. Any true conservative should instinctively understand that the best way for Congress to help the American people is to stop doing more stuff. We're having enough trouble dealing with the stuff they've already done. Moreover, oil is already down about 20% off its peak
without any government intervention at all. It's almost as if there were something--let's call it a "market"--that was capable of adjusting demand to match supply.
Whenever a proper conservative hears about a government plan to "fix" the market, this should immediately call to mind Tom Lehrer's line about another sort of government intervention:
"Let's make peace . . . the way they did in Stanleyville and Saigon"
are you serious?
i think most people would agree that the US is in dire need of a comprehensive energy policy.
Let me elaborate. I don't mean the government should be fixing prices or anything like that. But a comprehensive policy is needed.
You've got to appreciate the irony of a man who hasn't cast a senate vote since April demanding congress do its job.
Megan, I love your blog, but please recognize that you live in a city with mass transit. Most Americans don't and our economy depends on gasoline and diesel to function. Do you really think that sending $700 billion out of the country every year is a good idea?
Please consider the merits of drill here, drill now.
Thanks,
Monte
Monte:
Do you realize that there is no way to "drill now"? Where do you propose the oil companies drill that they aren't already?
I strongly oppose a "comprehensive energy policy", but exuberantly support the operation of a free market in energy. That would include eliminating the market-distorting ban on off-shore drilling.
Yes, the price of oil has dropped lately. Part of that drop is likely the retreat of a bubble in oil. (As you commented earlier, oil prices were marching upwards in the absence of new information about supply and demand.) However, part of that is also likely a result of the _news_ that the drilling ban is not sacrosanct. The price of oil had incorporated information that the ban could never be repealed, but all signs point to a near-term change in that policy, pushing prices lower.
Drill!
Joe Klein's conscience,
Do you realize that, if there is no place for the oil companies to drill, that you need not waste your energy perpetuating a ban on drilling in those places?
Wow, in this ever-changing world in which we live in, I added too many "that"s in my previous comment. That was a weird sentence, that was.
Off the shores of California, there are unused drilling sites that were taken off-line that could probably be operational within a year.
What government can do now is stop interfering with the free market at let it drill wherever it considers it profitable, instead of demanding that the Saudi's drill more but refuse to allow any drilling on American territory.
The amount of actual supply is at a point where even the prospect of new supply coming on line can bring down the price now.
John McCain has never met a problem that he doesn't think government intervention can't solve. This election is sort of like choosing between Coke and Pepsi.
I think there are plenty of things for congress to do but the things it is actually likely to do are not what's needed. Incentives for congress are in the very short term - to act NOW to do SOMETHING about the current high prices. Meaningful solutions are almost all long term and involve taxing fossil fuels to make them even more expensive.
Sure, McCain's call is a political gambit. But it's also informative in several ways. It draws attention to the fact that the Democratic majority in the Congress seems unwilling to continue discussing or even generally disclosing its political program. You would expect a minority party to draw attention to the actions of the majority party that the minority believes to be unpopular.
So the gambit draws public attention to which party has the agenda-setting Congressional majority and demands the majority defend its publicly indefensible positions. Should the political debate be silenced because the majority yells STFU! and unplugs the mics?
This election is sort of like choosing between Coke Zero and Diet Pepsi. You aren't going to get much out of either choice.
Megan, I agree with the general sentiment, but we aren't starting from a free market. Any lifting of restrictions or interventions imposed by congress would require additional acts of congress. Or if we can't get less intervention, "better directed intervention" would also require congress to act.
OTOH, you do have something of a point because it is reasonable to doubt that the intervention would be reduced or directed in a more reasonable fashion, but at some point something should be done.
Yeah, I pretty much thought the same thing Megan did when I heard what McCain was doing, except I've stopped using the term conservative to describe a person who believes in limited government as it only confuses things. Also, to the extent voters want a comprehensive energy policy, acting in haste would probably cause more problems than it fixes.
As a good libertarian I agree with Megan in drift, if not in application. Y' see, the government are CURRENTLY interfering, whether Congress shows up for work or not.
Dumping oil from the Strategic Petroleum Reserve on the market, allowing the market to begin drilling offshore and in Alaska - these are things that can be done right now to reduce the amount of infringements of the government at the present time.
It's certainly true that government would do less damage if they just stayed home. But they've also got to fix the damage they've already done by showing up in the past!!
The mainstream consensus seems to be that we need either "cap and trade" or "carbon taxes" to reduce carbon emissions, and most of the arguing is about which is better and the details (developing nations exempt? auction off the credits? tax the producer or tax the consumer?) of how it should be implemented.
Meanwhile, the mainstream consensus also seems to be that gasoline must be made cheaper soon, and most of the arguing is about how to achieve that goal (local drilling? gas tax holiday? windfall profits tax to fund a rebate?) so we can go back to our regular consumption patterns without financial strain.
Has either candidate connected these two things yet? Have I misread the public? It gives me a headache.
No headache needed, Geoff. The public opposes higher energy prices- full stop.
I suspect the mainstream consensus doesn't really understand "cap and trade" or "carbon taxes" and all of their ramifications. However, the mainstream consensus does seem to understand the link between more drilling lowering the price of oil and appears to be all for it.
There are plenty of places to drill... the eastern half of the Gulf of Mexico, off the Atlantic Coast, and off the Pacific Coast. There are also places in the continental US to drill as well.
As others have said, the government is currently interfering... let's get them to stop.
Megan, you may not realize it but the House Republicans are claiming their little debate-while-on-recess stunt is the cause of the dropping fuel prices, not the market.
"the best way for Congress to help the American people is to stop doing more stuff"
False. The best way would be for them to START doing LESS stuff.
Which is what the Republicans are yapping abour right now: they want a vote on ELIMINATING drilling bans that are distorting the market.
My favorite idea for a Congressional reform is to turn off the air conditioning in the Capitol Building. I think there would be a lot less summer legislating. We can then spread the idea to other governmental departments.
Megan - I'll leave it to the others to debate energy policy, but I generally agree with your broad point that Congress does less damage by inaction than by action. This of course holds true for a whole host of subjects. That is precisely why I'm voting for McCain - divided government is the best (and possibly the only) way to block, or at least slow down, ill-considered legislation. Even someone as blinded by Obama's charms as Megan must see that the combination of an Obama presidency and a Democratic Congress will very likely be an absolute disaster from the point of view of anyone who cares about constraining government.
Megan, you may not realize it but the House Republicans are claiming their little debate-while-on-recess stunt is the cause of the dropping fuel prices, not the market.
Well, it's certainly true that the government which governs best governs least. (Who said that? Hell, my memory sucks.)
A Tom Lehrer fan!!!! Marry me!!!
*ahem* Sorry, I meant: Good quote.
Megan,
I agree with your rule of thumb, but McCain is right in this instance.
There are very few points in time where Congress would be forced to do the right thing. Today is one of those times. If Congress met, however briefly, they would undo the damage they did earlier.
It wouldn't be the first time. Congress undid damage in 1986 with the passage of tax reform.
Reagan's instincts, like yours, were right to think that congress does damage ALMOST every time it acts. But hope for our future lies in the exceptions to that rule. Pelosi is making sure there are no exceptions.
So, yeah... You're wronger than McCain on this one. Pants and all.
Good point John Wright. I have never read someone refute one Megan's arguments so convincingly.
It's not galling that Megan is for Obama over McCain; I lean a little in the other direction, but unwillingly and with a clothespin firmly fastened to my nose. What sticks in my craw are posts like this, where we pretend what McCain and the GOP are urging Congress to do is government interference instead of the repealing of government interference.
Uh, the point is not to to reach a market-clearing price for oil. The point is to provide the most energy at the lowest price point with the fewest negative externalities. Which means that fossil fuels need to be more expensive, not less. This won't work without some government intervention. Unbanning drilling is fine but it doesn't do that much for oil prices in either the near or long-term. We're talking about a miniscule amount of US supply that may be available in 10-20 years, assuming USGS estimates are accurate. And drilling does nothing for electricity-- we have plenty of cheap, abundant, incredibly dirty coal, and short of government intervention (eg Pigouvian tax or cap and trade) there is no incentive not to keep burning it.
Or maybe you don't see emissions as a problem?
I'm from the energy industry and I'm glad that the industry is having this boom. But don't kid yourself, intelligent policy is absolutely required (whether it's likely or not, or whether it can be constructed hastily or not is a separate issue).
Was it P. J. O'Rourke who said "giving money and power to Congress is like giving alcohol and car keys to teenage boys"?
I seriously doubt high energy prices will bring down pollution.
When I was at the LSE it was established that even if governments had full information about all agents of a the market and if they had all information about their relationships and interaction - say in the distant year 3452 - they would still be too late to implement meaningful market-adjusting policies. It works like the Heisenbergsche Unschärferlation, no (with a spanish accent)?
This is why the governments need to "fix" things that usually had posed a problem or inconvenience a few years ago usually commences right when the market has adjusted back to "normal" and it is indeed a miracle that despite all that help we remain productive "free agents"?
(Then there are many other reasons why these policies fail - apart from bad information and timing. For example the fund manager syndrome. Managed funds always underperform compared to the market. A monkey would have a better success-rate than fund managers by simply applying 50:50 chance to the equation.)
Anyway - high prices are good if they have been estblished on a transparent free market. There is no cheating and no shortcuts to supply/demand efficiency. Now - where are the transparent and free markets for energy, water and food?
However - in case we were also discussing ecological implications of energy policy and not merely economical - this debate would change. All this taking-the-piss out of non-economists would turn into silence as we are all pathetic in the ecological sense... we know and therefore like our pond and the ocean scares us. protect the ponds - screw the oceans...
How should we add meaningful ecological accounting WITHOUT transparent free markets? The only other option is prohibition. No - you are not allowed to produce cars that waste.. no you are not not allowed to produce food that wasts the soil... Those who dread this prohibition world should be demonstrating in front of congress today for adding ecological accounting (and yes taxes) to our consumption.
As it is - neither the statists nor the libertarians are doing anything meaningful in ecological terms. We are waiting for the existing intransparent, semi-free market to lead us based on pain...
Philip of Macedon: "You are no better than a barbarian trying to box. Hit him in one spot and his hands fly there; hit him somewhere else, and his hands go there...." And there would be so many low hanging fruits.
"Well, it's certainly true that the government which governs best governs least. (Who said that? Hell, my memory sucks.)"
Henry David Thoreau said it, in his essay Civil Disobedience. Here's a couple of relevant snippets:
Amitav,
And drilling does nothing for electricity
What about when the drilling taps supplies of natural gas? Natural gas-fired power plants produce over a fifth of America's electricity, and natural gas is often found in oil fields. Opening the 85% of the outer continental shelf currently off-limits to offshore drilling would increase our domestic supplies of natural gas as well oil.
Which means that fossil fuels need to be more expensive, not less. This won't work without some government intervention.
I disagree with your view that the government should intentionally make fossil fuels more expensive, but even if I agreed with you, I still wouldn't oppose expanding domestic offshore drilling. A better way to discourage use of fossil fuels, if that's your goal, would be to raise taxes on them. Keeping 85% of the outer continental shelf off-limits to drilling doesn't mean we use less fossil fuels, it just means we use more imported fossil fuels, as a percentage of our total fossil fuel consumption.
Even if your goal is for us to use less fossil fuels overall, why not have a higher percentage of that reduced amount of fossil fuels come from domestic production? Every barrel of foreign oil we can replace with domestic oil reduces our fiscal deficit (because it means increased royalty payments and taxes) and reduces our trade deficit. Increasing domestic production will also create lots of high-paying jobs in the U.S.
Luis A. del Valle- I didn't mean to refute Megan (as I think we largely agree with each other and I think she's a peach), but I appreciate that you saw the logic of my point:
Government is restricting the energy market already, meaning that it'll take acts of Congress to change that, and to lift the restrictions. Staying home would only work if they hadn't altered the law already.
John
DaveInHackensack,
I mashed a few thoughts earlier; let me separate:
1. Megan's view is that the answer to our energy problems is simply getting government out (she actually said getting government to "stop," but I'll assume she wants them to reverse course and make markets free). I think this viewpoint is wrong, but Hugo Pottisch already expressed my sentiments perfectly. I am a supporter of transparent markets with Pigouvian taxes; I don't think this is possible without government activity.
2. The separate view expressed by some posters is that drilling in OCS etc will bring down prices. Even assuming this should be a goal, my perspective is that it won't make much difference. I'm lukewarm on offshore drilling, but my frame of reference is that ten years ago we were flirting with $10 oil and five years ago we (industry) were talking about a "natural price" in the mid-$20s. Those days appear to be gone forever barring massive contraction from China and India. I don't think adding an additional 1% of high-lifting cost oil to domestic supply in ten years will make oil "cheap," at least from my perspective; I'm not even sure it will make oil "cheaper," since we can't predict what will happen on the demand side. Given all that, how we think about offshore drilling depends a lot on how we value things like the impact of the barium on marine environments and the impact of rigs on coastal views. Personally I'm lukewarm; I don't really mind more drilling. I just don't think it will have the short-term price impact to justify some supporters' claims. It's definitely not part of the long-term answer in any case.
3. Coal is cheaper than natural gas. Offshore natural gas is more expensive than onshore natural gas. Even if we find, extract, and transport more offshore natural gas, we still have a large and dirty coal fleet that is not pricing its emissions properly. Cheaper natural gas doesn't change this fact, though it might limit incentives to build out more coal-fired plants.
Finally, you say:
Keeping 85% of the outer continental shelf off-limits to drilling doesn't mean we use less fossil fuels, it just means we use more imported fossil fuels, as a percentage of our total fossil fuel consumption.
If you think more drilling brings price down, then don't you believe that not drilling keeps prices up (by artificially restricting supply)? Doesn't keeping prices up bring our demand down? So, in fact, doesn't restricting drilling reduce our overall consumption of oil? That's the logic of the pro-drilling position, anyway.
Look-- we are going to continue to process massive amounts of Venezuelan and Mexican crude that will be priced on fungible international benchmark crudes for as long as we have refineries on the Gulf Coast. No amount of offshore drilling will change this. Petroleum independence is not attainable; by definition "energy independence" means "moving away from a petroleum-based economy." Whether this is feasible or desirable is a debatable point, but it needs to be acknowledged in any discussion on energy policy.
Look-- we are going to continue to process massive amounts of Venezuelan and Mexican crude that will be priced on fungible international benchmark crudes for as long as we have refineries on the Gulf Coast.
The point is that we need the US to become a net exporter of energy, instead of an importer. It doesn't matter than we end up importing Venezuelan and Mexican crude, because from what I understand only the US can refine a lot of their crude. However, if we're importing their crude and exporting a similar amount of crude we don't run a massive trade deficit. The reason why the trade deficit is so high is because we have to import so much oil without exporting a similar amount.
I'm for drilling as long as we auction off the rights, so that oil companies have to compete for them and it's part of a greater solution to stop being a net importer of energy.
DaveInHackensack,
I mashed a few thoughts earlier; let me separate:
1. Megan's view is that the answer to our energy problems is simply getting government out (she actually said getting government to "stop," but I'll assume she wants them to reverse course and make markets free). I think this viewpoint is wrong, but Hugo Pottisch already expressed my sentiments perfectly. I am a supporter of transparent markets with Pigouvian taxes; I don't think this is possible without government activity.
2. The separate view expressed by some posters is that drilling in OCS etc will bring down prices. Even assuming this should be a goal, my perspective is that it won't make much difference. I'm lukewarm on offshore drilling, but my frame of reference is that ten years ago we were flirting with $10 oil and five years ago we (industry) were talking about a "natural price" in the mid-$20s. Those days appear to be gone forever barring massive contraction from China and India. I don't think adding an additional 1% of high-lifting cost oil to domestic supply in ten years will make oil "cheap," at least from my perspective; I'm not even sure it will make oil "cheaper," since we can't predict what will happen on the demand side. Given all that, how we think about offshore drilling depends a lot on how we value things like the impact of the barium on marine environments and the impact of rigs on coastal views. Personally I'm lukewarm; I don't really mind more drilling. I just don't think it will have the short-term price impact to justify some supporters' claims. It's definitely not part of the long-term answer in any case.
3. Coal is cheaper than natural gas. Offshore natural gas is more expensive than onshore natural gas. Even if we find, extract, and transport more offshore natural gas, we still have a large and dirty coal fleet that is not pricing its emissions properly. Cheaper natural gas doesn't change this fact, though it might limit incentives to build out more coal-fired plants.
Finally, you say:
Keeping 85% of the outer continental shelf off-limits to drilling doesn't mean we use less fossil fuels, it just means we use more imported fossil fuels, as a percentage of our total fossil fuel consumption.
If you think more drilling brings price down, then don't you believe that not drilling keeps prices up (by artificially restricting supply)? Doesn't keeping prices up bring our demand down? So, in fact, doesn't restricting drilling reduce our overall consumption of oil? That's the logic of the pro-drilling position, anyway.
Look-- we are going to continue to process massive amounts of Venezuelan and Mexican crude that will be priced on fungible international benchmark crudes for as long as we have refineries on the Gulf Coast. No amount of offshore drilling will change this. Petroleum independence is not attainable; by definition "energy independence" means "moving away from a petroleum-based economy." Whether this is feasible or desirable is a debatable point, but it needs to be acknowledged in any discussion on energy policy.
JordanT,
Under no plausible scenario envisioned by any geologist or economist of any political persuasion will the US ever become a net exporter of petroleum again. Unless Iraq becomes the 51st state.
Amitav,
Even if offshore drilling had no effect on prices (all things being equal, the increased supply would lower prices, but of course petroleum prices are driven by global supply and demand factors), I think it would still be worth increasing the percentage of domestic oil that we consume, since, as I mentioned above, every barrel of foreign oil we substitute with domestic oil reduces our trade and fiscal deficits, and creates additional high-paying jobs in the U.S.
Another reason why we ought to open up more federal lands and waters to offshore drilling is to protect against unforeseen declines in oil production elsewhere. Even if I shared your opinion that the government should try to keep oil prices expensive, I think it would be prudent to increase our domestic drilling (if you wanted to avoid increasing supply, you could have the government buy it all and keep it in an expanded strategic petroleum reserve). Since it can take years to develop offshore wells, better to start now, so those resources will be available in the event of likely supply constraints elsewhere in the future.
"Petroleum independence is not attainable"
This is a straw man. I never argued it was. I did argue that increasing our domestic production as a percentage of our total consumption is a good idea, for several reasons. That doesn't mean that we shouldn't pursue feasible non-petroleum sources of energy (e.g., nuclear); we should.
Amitav,
Even if offshore drilling had no effect on prices (all things being equal, the increased supply would lower prices, but of course petroleum prices are driven by global supply and demand factors), I think it would still be worth increasing the percentage of domestic oil that we consume, since, as I mentioned above, every barrel of foreign oil we substitute with domestic oil reduces our trade and fiscal deficits, and creates additional high-paying jobs in the U.S.
Another reason why we ought to open up more federal lands and waters to offshore drilling is to protect against unforeseen declines in oil production elsewhere. Even if I shared your opinion that the government should try to keep oil prices expensive, I think it would be prudent to increase our domestic drilling (if you wanted to avoid increasing supply, you could have the government buy it all and keep it in an expanded strategic petroleum reserve). Since it can take years to develop offshore wells, better to start now, so those resources will be available in the event of likely supply constraints elsewhere in the future.
"Petroleum independence is not attainable"
This is a straw man. I never argued it was. I did argue that increasing our domestic production as a percentage of our total consumption is a good idea, for several reasons. That doesn't mean that we shouldn't pursue feasible non-petroleum sources of energy (e.g., nuclear); we should.
Guys,
I think we all know that drilling for more oil will never be the ultimate answer, but even Paris Hilton knows that it's the best interim answer we have, and it's one that will immediately help the US. Let's drill for oil where we know it is; allow oil companies to bid for the leases and with the money invest in ways to reduce the dependence on foreign oil. This isn't a case of "either-or" (drilling or alternative fuels) - it's a case of "both-and". If a socialite in a bikini knows this, surely it's time Congress knew it too.
John
DaveInHackensack,
For the record (again), I'm not anti-drilling. But I have to push on your arguments, because ultimately I think that drilling is a futile endeavor, and I can't get behind rabid proponents of it. Since in the big picture it works against the broader solution of less oil consumption, I'm more sympathetic to the anti-drilling people. (Even though, as John points out, even Paris Hilton thinks otherwise). Mainly, I don't care much either way, since I don't think it will have much impact in any scenario.
I think it would still be worth increasing the percentage of domestic oil that we consume, since, as I mentioned above, every barrel of foreign oil we substitute with domestic oil reduces our trade and fiscal deficits, and creates additional high-paying jobs in the U.S.
1. What reasonable expectations do we have that new domestic oil supply will reduce our consumption of foreign oil? If any new supply (foreign or domestic) reduces prices and increases demand, why won't we just import more oil in addition to our newfound domestic reserves?
2. Since we will never be a net exporter of oil again, isn't the only way to assure a reduction in the trade deficit due to petroleum imports to focus efforts on moving away from petroleum consumption?
3. Did I miss the memo where only US companies get to drill offshore? Last time I checked the largest offshore platform in the world was Thunderhorse, operated by BP right off the Louisiana coast. I'm pretty sure when U.S. refiners buy oil from a British company, it counts as foreign trade.
Another reason why we ought to open up more federal lands and waters to offshore drilling is to protect against unforeseen declines in oil production elsewhere.
I'm not sure I get this argument. We will never be able to produce as much oil as Saudi or Russia. Even the most aggressive estimates of potential new domestic supply are minimal in comparison to those sources, so we're not going to be a swing producer with global price-setting capabilities in any scenario. If your point is that we need to protect against future price shocks, why wouldn't a bigger buffer in the SPR solve this problem? Isn't that why it was created? On the other hand, if your point is that we face a grave geopolitical risk and need to prevent being cut-off from foreign sources of oil, I'd answer (a) even if we were forced to only buy from friendly countries like Canada and Norway, oil is a completely fungible commodity, so some middle-man will arbitrage away the resulting price differentials and new trade patterns will emerge; (b) oil producers are by and large rational actors and will act in their own self-interest, which generally includes selling to the largest oil consumer in the world; and (c) since we will never again be a net exporter, we will always be at risk from reduction in foreign sources of supply, so the logical answer would again seem to be that we need to focus on shifting away from oil consumption.
I'd add that this latter issue is not a concern to me, and I think the foreign oil bugbear is basically a smokescreen-- but useful insofar as it gets people moving on reducing consumption. My main concern is pricing in the pollution externality via a transparent mechanism, which also addresses my concerns with electric power, which, as we've discussed, offshore drilling does nothing to mitigate.
Amitav
New supply is unlikely to cause a medium to long term drop in price that is so large that it causes use to go up as much as the increased supply. It reasonable to expect that it won't. And that's world wide. Its a near lock that it won't increase US oil use as much as the increased supply.
That doesn't logically follow. Not being an exporter, doesn't mean that you don't reduce imports by increasing domestic production. Since imports would be reduced, the part of the deficit that is connected to petroleum imports would be reduced. It would be reduced because we would be importing less oil, and also because the dollars per barrel will be at least slightly lower.
If its a British company, producing in the US, than buying from them wouldn't be an import. The reality is more important than what it officially counts as, but in this case the reality is that it isn't an import, and it would not be counted as an import.
"Protect against" can mean "reduce the damage from", it doesn't necessarily imply "eliminate the damage from"
And yes oil is fungible, so oil drilled and pumped in the US will go up in price if foreign sources are cut off or reduced, but the more oil coming from the US, or more generally the more oil coming from relatively safe areas, the less harm is done by cutting off one source that may be currently at risk.
My main concern is pricing in the pollution externality via a transparent mechanism, which also addresses my concerns with electric power, which, as we've discussed, offshore drilling does nothing to mitigate.
Even if that is the main concern (and we might not agree on that), not dealing with that main concern, would not mean there isn't a benefit on secondary concerns.
But in this case it does deal with the main concern. It doesn't eliminate the environmental risk, but it does reduce it. Sending oil half way across the world in tankers has a greater risk of serious spills, than drilling for oil 50 miles away from the US.
I know your just joking, but they would say that they are for removing restriction to get to the oil. Less restriction is the goal here for the conservative. So sorry but this time you got it wrong.
Tim Fowler:
If its a British company, producing in the US, than buying from them wouldn't be an import. The reality is more important than what it officially counts as, but in this case the reality is that it isn't an import, and it would not be counted as an import.
Touche. We all say stupid things on the internet sometimes.
But the broader point holds: neither you nor I nor anyone else can predict oil market dynamics 5-10 years hence such that we can reasonably state the impact of such a miniscule source of new supply. Perhaps there will be a small price impact and/or a weak negative effect on imports. It's just as likely that global market dynamics will eliminate the effects of new supply on both price and trade. Since there's no scenario where new drilling will have a big impact on either prices or trade, the whole debate is a tempest in a teapot to me (which is no doubt why I keep commenting in this forum!); the most vehement supporters on either side really overstate the value of this issue to either cheaper gasoline on the one hand or reduced emissions on the other. People who are against drilling because they care about the impact on marine environments probably have the most tenable position, imho, even though I might not agree with them.
But in this case it does deal with the main concern. It doesn't eliminate the environmental risk, but it does reduce it. Sending oil half way across the world in tankers has a greater risk of serious spills, than drilling for oil 50 miles away from the US.
Reducing our current oil consumption by less than 2% would have the exact same impact on supertanker trade (all things equal) of displacing it with the estimated new supply, plus it would lower domestic emissions, which reduced supertanker trade obviously doesn't address. Or were you being tongue in cheek?
Amitav - Sure we can't predict the effect of new oil on the price of oil, but it near certain that the new oil supply will cause us to import less oil, than we otherwise would have. Are scenarios where this isn't the case utterly impossible? No. But they are very unlikely.
Also the new production would not be likely to be minuscule.
To the extent that that is true (and it probably isn't as putting all the discussed areas in to production would be reasonably likely to result in additional new production that is not "less than two percent" of our usage), its not very meaningful. Its not a situation where you just have "either or", you can have "both and".
Also even if it was either or, reducing our oil consumption by 2%, depending on how exactly its done, and under what conditions, is likely to have downsides. Expanding drilling, not so much.