Offshore Drilling: Two-Tenths of 1c Price Reduction in 18 Years
Sep 17th, 2008 | By Martin Denholm | Category: Oil Investment & Alternative EnergyThe US House of Representatives has just passed legislation that lifts the ban on offshore oil drilling. This opens up most of the US coastline to exploration. Individual states now have the option to allow drilling between 50 and 100 miles off their shores. The problem is offshore drilling is unlikely to solve America’s energy crisis. According to the government’s own report, widespread offshore drilling would result in a price reduction of perhaps “two-tenths of one cent 18 years after drilling begins.”
This from Martin Denholm in The Smart Profits Report:
Crude oil prices have declined dramatically from the record high of $147.27 a barrel on July 11 to about $91 a barrel. But consumers are still not seeing much relief at the pump.
Average prices have slipped back under the $4 a gallon level. But the devastating aftermath of Hurricane Ike has crippled many refineries in the Gulf of Mexico and pushed the price of gas back up.
According to AAA, the national average is $3.84. This is up almost 5% from last week. Ike forced the closure of 14 refineries in Texas and Louisiana that amount to 20% of US refining capacity.
It took 3.7 million barrels of production offline. Experts say it could be up to two weeks before normal operations resume.
This could push gas prices back to the $3.90 a gallon level. In this scenario public sentiment is likely to shift further towards offshore drilling for three reasons: 1) To break America’s dependence on foreign oil resources; 2) to alleviate some of the pressure at the pump; and 3) to provide a safety net from attacks to oil supplies in the Middle East and Africa.
The problem, however, is the US still gobbles up 25% of the world’s oil but only possesses 3% of the world’s oil reserves. Drilling, therefore, may not have the quick and positive impact on gas prices that many expect.
In fact, according to the International Herald Tribune, the government’s own analysis shows that a widespread offshore drilling program “would result in a price reduction of perhaps two-tenths of one cent 18 years after drilling begins.”
This issue is a longer term concern. But it’s one well worth keeping an eye on in the run-up to Election Day on November 4.
Source: Fed Up With Financials? Let’s Go Drill For Oil Instead…
Can I have a real source please? “Government” could mean anything, or it could just be made up.
Do consequences matter or are we eternal slaves of our consequences?
Very informative article. Thanks so much for this post, I am glad to have Stumbled across it =)
This is crazy. We need to start focusing on alternative energy. America if it hasn’t already is going to go broke. We are in so much trouble!