Getting Out of the Oil-Import Hole

COMMENTARY Environment

Getting Out of the Oil-Import Hole

Dec 26th, 2010 1 min read
David W. Kreutzer, Ph.D.

Senior Research Fellow, Labor Markets and Trade

David Kreutzer researches and writes about labor markets and trade.

"Merry Christmas, Iran, Saudi Arabia, Venezuela, and other oil-exporters." At least, that's what President Barack Obama could have said as he presented these nations with a n early gift: reversing course (again) and declaring our own oil reserves off-limits. And so we dig ourselves deeper into our oil-import hole.

This revised policy will lead to higher world oil prices and an increased need for foreign oil imports. American consumers get poorer and foreign oil-producers get richer. This latest roadblock to domestic energy may not hit consumer pocketbooks immediately, but successive anti-energy policies over the years are being felt now.

Producing oil from new leases takes at least several years -- and more in areas where there has been little exploration, testing and production. In fact, this was one of the reasons many congressional leaders and presidential candidates opposed taking action to eliminate the offshore-drilling moratoria back in the energy-price run-up of2004-2008 -- they said it would take years to have an impact on prices.

However, in the fall of 2008, having spent the summer recess facing the wrath of constituents who themselves faced $4 per gallon gasoline prices, Congress wised up. Instead of extending these economy-killing offshore-oil-production moratoria, lawmakers did nothing (thankfully) and let them expire. The Bush administration then initiated the process to develop the oil reserves off both the East and West coasts in its 2010-2015 five-year plan.

However, within weeks of taking office, the Obama administration discarded that plan and promised to delay for two years and come up with its own plan for 2012-2017 instead. Then, last March, the administration announced the opening of these offshore areas for oil and gas production. The BP oil spill caused another stoppage. Pressing the brake and the throttle at the same time doesn't move you down the road very quickly.

This string of anti-energy policies continued recently, as Secretary of the Interior Ken Salazar disconnected the throttle and welded the brake to the floor. The new plan for 2012-2017 removed any possibility of opening up the Atlantic, Pacific or the Eastern Gulf of Mexico for oil production. In addition, leases for areas that are already open have been pushed back from 2011 to at least 2012.

More than five years have elapsed since the last run-up in petroleum prices started. That's five years we could have spent developing billions of barrels of oil reserves and large quantities of natural gas. But we didn't. Instead we get promises of more delays.

World petroleum prices now approach $90 per barrel, and gasoline prices exceed $3 in many places. Both may well go higher, and along with them the increased billions we must pay for imported oil. When that happens, will the "we-can't-drill-our-way-out-of-it" crowd still say that drilling takes too long?

David Kreutzer, Ph.D., is the research fellow in Energy Economics and Climate Change at The Heritage Foundation.

First appeared in The Cleveland Plain Dealer