Saturday, August 02, 2008

Domestic drilling will not relieve high gas prices

Congress has breached a weeks-long impasse over an energy bill ostensibly aimed at alleviating high gas prices, but which economists say will carry no benefit for American consumers at the pump. Top Democrats have resisted lifting a ban on off-shore drilling, but popular support for increased production combined with Republican efforts to cast opponents as obstructionist has made that stance politically untenable.


The oil industry and their allies in Congress have successfully argued that the solution to high gas prices is increased domestic production, namely in areas that have previously been off-limits (in this case for environmental reasons).

It is widely recognized that this kind of drilling will have no meaningful impact on prices, since the amount of oil projected is too small, the time frame too broad (it can take decades to establish new production), and the often misunderstood reality that oil is sold on a world market: just because it is produced here does not mean it is consumed here. Advocates, such as the Bush administration, do not deny any of this, instead claiming that the move will "send a message" to oil markets, thus relaxing prices.

The new compromise can be read as victory for oil companies, whose scope of operations will be expanded to ecologically sensitive areas, and who stand to profit most from the undertaking. Also, members of Congress will appear to be taking action on high gas prices during an election season, as opposed to doing nothing; which, apart from crafting a long-term move away from fossil fuels and supporting renewables, is about all they can do about energy costs in the short-term anyway.

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