Climate

EIA: New offshore drilling will lower gas prices in 2030 a few pennies a gallon

Bush official Dan Bartlett admits authorizing offshore oil drilling will be unlikely to win over any GOP votes: “Republicans have made a calculation that cooperating with this administration at this time is not necessary for them to pick up seats”

EIA Offshore 2009 small

The Obama administration announced today that it will be approving “significant oil and gas exploration off America’s coasts.”  Why?  Why?  Why?

Last year, the U.S. Energy Information Administration report, “Impact of Limitations on Access to Oil and Natural Gas Resources in the Federal Outer Continental Shelf” analyzed the difference between full offshore drilling (Reference Case) and restriction to offshore drilling (OCS limited case).  In 2020, there is no impact on gasoline prices (right hand column).  In 2030, US gasoline prices would be three cents a gallon lower.  Woohoo!

I have previously written about the trivial impact of opening the OCS further to drilling — The oil companies already have access to some 34 billion barrels of offshore oil they have barely begun to develop (see “The cruel offshore-drilling hoax“).  I have also written that I thought it inevitable that the Dems would cave on drilling when oil prices started to jump (which hasn’t happened yet thanks primarily to the global recession).

So the only reason for the administration’s policy shift would be to get conservative votes for comprehensive energy reform.  As Think Progress explains, that effect seems unlikely:

In the summer of 2008, then-candidate Obama explained that he saw allowing offshore oil drilling as a compromise necessary to “get something done“:

“The Republicans and the oil companies have been really beating the drums on drilling,” Obama said in the Post interview. “And so we don’t want gridlock. We want to get something done.” The freshman Illinois senator and presidential nominee-to-be added: “If, in order to get that passed, we have to compromise in terms of a careful, well thought-out drilling strategy that was carefully circumscribed to avoid significant environmental damage “” I don’t want to be so rigid that we can’t get something done.”

During an appearance on MSNBC’s Morning Joe, former Bush official Dan Bartlett said that the move is unlikely to get any Republican votes for an energy bill. While saying that he thinks it is a “shrewd move” that will “demonstrate”¦that the Democratic Party doesn’t just cater to the extreme aspects of their base,” Bartlett conceded that it will likely not win any Republican votes because “Republicans have made a calculation that cooperating with this administration at this time is not necessary for them to pick up seats:”

BARTLETT: This is a shrewd move by the White House this announcment they’re doing on energy and offshore oil drilling. “¦ These are the things they need to demonstrate to their constituents that the Democratic Party does not just cater to the extreme aspects of their base “¦ Now, do I think that this measure here will help grease the path for a climate change bill and bring Republicans on board? No. Republicans in the Congress have made a calculation that cooperating with this administration at this time is not necessary for them to pick up seats. So if this is more of a legislative maneuever in order to get a broader bill on climate change, unfortunately this is going to come up short.

Indeed, Republicans have thus far indicated that they are unwilling to compromise in exchange for the administration’s lifting of offshore oil drilling bans. House Minority Leader John Boehner (R-OH) immediately “dismissed the president’s plan as not going far enough in opening up U.S. waters for exploration,” even going so far as to accuse Obama of defying “the will of the American people” because he didn’t open up even more territory for offshore drilling. Meanwhile, Chairman of the House Republican Conference and the American Energy Solutions Group Rep. Mike Pence (R-IN) derided the plan as a “smokescreen” and a “feeble attempt to gain votes” for comprehensive energy legislation.

Matt Yglesias writes, “I don’t understand this at all. Increased coastal drilling would be a small price to pay in exchange for actual congressional votes for an overall energy package that shifts us to a low-carbon economy over time. But any price is too high a price to pay in exchange for nothing at all. This isn’t the greatest environmental crime in human history, but it sure does seem like poor legislative strategy.”

Sarah Palin responds with a pair of tweets. In the first, she writes, “Drill, baby, drill.” In the second, she praises Boehner’s response and admonishes Obama for trying to win over conservative votes for an energy overhaul:

rougin

Newt Gingrich told the St. Petersburg Times that while he likes the idea of drilling, he thinks Obama is doing it too late. “If he’s going to announce he’s for drilling, he should announce that we’re drilling now. I don’t think the people want a party of manana,” Gingrich said.
For a full set of dismayed quotes from progressives, go to Enviroknow.
UPDATE:  If you go to the Department of Interior website, which was difficult to access earlier this afternoon, you’ll see that Obama isn’t actually issuing leases in most of these places but merely allowing some exploratory drilling.

32 Responses to EIA: New offshore drilling will lower gas prices in 2030 a few pennies a gallon

  1. Pete Dunkelberg says:

    Leave it in the ground!

    How much climate damage we avoid is determined by how much carbon we do not burn.

  2. Bill W says:

    Well, you know, Republicans aren’t the only ones in Washington who get campaign contributions from Big Oil. Maybe he’s trying to win over oil-friendly Dems.

  3. MarkB says:

    Correct me if my perception is wrong, but I see this move as one timed to coincide with the draft release of the Kerry/Lieberman/Graham legislation, which calls for emissions reductions, carbon pricing, offshore drilling, nuclear and renewable incentives. While it may not win Republican votes, by opposing the legislation, it helps to further cast them as obstructionists opposing bi-partisan legislation that contains measures having broad public support (unfortunately, most of the public erroneously believes more offshore drilling will lower gas prices substantially and soon). When Republicans claim the legislation will cause everyone to pay thousands in taxes, cost jobs, or what not, Obama can shoot back with the increased offshore drilling as part of the bill, which has clear support among Independents.

    Where this would be a bad move is if Obama did not make his support for offshore drilling contingent on the broader and more substantial clean energy initiatives.

  4. Raindog says:

    I hated the health care plan for not being liberal enough and felt like it was a big giveaway to the insurance companies until it passed and now I am pretty happy with it. We were all skeptical that he could get enough votes for health care but he got it done.

    In the same vein, if by including expanded offshore drilling as part of a package with meaningful climate change/clean energy legislation he can get enough votes for passage I would be for that. There is a chance that there won’t be any economic accumulations on the east coast and the Gulf coast is already full of production platforms.

    Obama has a point that if the economy craters we won’t have any money to do cap and trade or clean energy. There is a balance to be found. If the economy craters we will just go for the cheapest thing, regardless of how dirty it is.

  5. Pete Salazar says:

    Gasolene has risen 1 dollar a gallon since the innaguration. At that rate, 1 dollar a year, that would be a 4 dollar increase in a 4 year term. The EIA quoted above predicted 2010 crude would trade at 40 dollars and it is over 81. They have very far off in forcasts in the short term. We have no idea what the price will be in 2020. Admit it.

  6. mike says:

    I don’t see what’s wrong with trying to get more republican/right/conservative support. No matter what, the US will be using oil/nat. gas for the next 50 years (at least). Why not get more of that oil from our back yard? If you the include the gas required to ship that oil from the middle east vs. the gas required to ship that oil from the gulf or Virginia, then you probably cut down significantly on CO2 emissions.

    I’m really getting sick of this site’s “if it’s not renewable then I’m going to criticize” attitude. Obama is just trying to be pragmatic.

  7. Dean says:

    Politically it can only gain votes in inland states that don’t have a coastline. With maybe a few exceptions (in the Gulf?), most coastal states (including Republican-leaning ones) don’t want drilling.

    Otoh, folks in Indiana and Oklahoma (et al) aren’t so concerned about coastlines.

    It’s very much a NIMBY thing.

  8. Bob Wallace says:

    I see it as a snake de-fanging move.

    This takes one “they’re going to kill your granny” issue away from the Party of NO!. There’s no way they can make a credible attack against Obama/climate legislation on the basis drilling at home.

    I really doubt that opening up these areas to drilling will cause any significant increase in the amount of oil burned world-wide in the next 100 years. Getting a climate bill through that causes an increase in public transportation and EV/PHEV vehicles should more than offset any small short term increase and speed our movement away from fossil fuels.

    If the Nissan Leaf is as expected – moderate cost, adequate range – then within a very few years we should see a major move away from ICE vehicles.

  9. Chris Dudley says:

    It is wrong to say it will reduce gasoline prices at all. Rather, it sustains high prices since that oil is technically difficult to get at. It is like Bakken oil or the new Brazil deep water finds. Expensive to produce. So, we are signing up for high oil prices to make these desperate efforts happen.

    If we want to spur economic growth by cutting oil prices, we have to cut oil consumption so that only the low cost producers are producing.

  10. Drilling for oil in new areas off shore can only hurt the environment, not help it. To the extent that more native gasoline lowers the cost of gasoline, that hurts our effort to stop global warming. We need a higher cost of gasoline, not a lower cost. To the extent that we become more energy self-sufficient, we weaken America’s resolve to be more energy efficient to avoid energy import costs.

    Furthermore, the political debacle over the health care law illustrates that off-shore drilling will create no
    Republican cooperation for a climate bill. After all, Obama and the Democrats gave Republicans an enlarged health insurance industry. Why should an enlarged oil industry help reduce the obvious hatred most Republicans have for Obama?

  11. Jay Turner says:

    Since we’ll still be using some oil and some natural gas in 10 years, it makes better economic sense to use domestically produced products instead of imported ones. From a political standpoint, it’s good move, since it shows that the administration is sensible and listens to conservate issues.

  12. paulm says:

    A few things…
    .Obama has thought long and hard on this.
    .The week before they make a statement about peak oil
    .This gas/oil is better than Tar Sand oil from all angles including emissions(goodbye Alberta)
    .America needs security otherwise it will be not the chaos in store, but utter chaos because of peaking.

  13. Bob Wallace says:

    This part of Obama’s speech about drilling doesn’t seem to be getting much attention…

    “This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy. And the only way this transition will succeed is if it strengthens our economy in the short term and long term.”

  14. Catchblue22 says:

    Frankly I am impressed with this president. I think he makes decisions that he honestly believes will result in the best possible outcome for society. If extracting this oil will make it easier to pass climate legislation, I am for it, providing the development is not reckless. Though I am skittish about drilling for oil offshore, I am also skittish about sending trillions of dollars to Saudi Arabia. A strong economy will ease the transition to clean energy.

  15. Seconding and expanding (in my direction, at least) on a point made by MarkB in #3 above, and also expanding on the first sentence in the quote from Batlett in the main body, this move will not garner any Republican support, but it may serve to shore up Democtatic support, which is the sine qua non of getting anything done. “The” Democrats do not comprise a single, lock-step, clockwork machine, and as a consquence realy compromise must be made or it is an absolute guarantee that nothing will be done.

    On this last point: SSJ, dear gods and flying spaghetti monster, save us from our allies! The whole “not liberal enough” meme is nearly enough to cause me to lose it. Gore wasn’t liberal enough so Nader gave us Bush for president. (Quite aside from elementary arithmetic — had only 10% of Nader’s votes in Florida gone to Gore, Gore would have won — there is the well-known and mathematically irrefutable fact of Arrow’s Paradox of Voting which explained the preceding 50 years before it occurred.) Just as it is always easier to get forgiveness than permission, it is invariably easier to correct a flawed bill once it is on the books than it is to pass a perfect bill in vaccuo

    “The perfect is the enemy of the good.”
    — Voltaire

  16. Mark Shapiro says:

    What Bob Wallace said:

    “I see it as a snake de-fanging move.”

    Bob’s comment #8 is on the money. The goal is to destroy demand for fossil fuels (starting with coal) using three toolsets: energy efficiency, renewables, and simple conservation. The source of the fuels is a marginal issue.

    The move also buys some insurance against destroying the Democratic party and the clean energy agenda with it. If Obama had kept drilling restrictions and the price of oil went above $100/bbl — for any reason — Rupert Murdoch and the other burners would be yelling “drill, baby, drill” 24/7.

    “I see it as a snake de-fanging move.”

  17. climate undergrad says:

    If you want to market a bill as a Clean Energy, American Jobs, American Security bill then this fits 2/3, no?

    Obama states:

    “But what I want to emphasize is that this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy. And the only way this transition will succeed is if it strengthens our economy in the short term and long term. To fail to recognize this reality would be a mistake.”

    I don’t pretend to know what I’m talking about but my reaction is that it:
    1) It “is part of a broader strategy” to gain support from (all) DEMOCRATS and maybe (but unlikely) some republicans – *see health care*
    2) Provides a buffer from any Middle East related conflict that increases import prices
    3) In November not be portrayed as a party responding to their radical (i.e. informed) constituents.

  18. New offshore blocks will do nothing for the economy in the short term. It will do little in 2020 or later if oil comes on line. As Chris Bowers at Open Left said, this is a purely political move. The reality is that Obama’s trying to get a few conservative Democrats on board and triangulate to try to divide the Republicans.

    “And the only way this transition will succeed is if it strengthens our economy in the short term and long term. To fail to recognize this reality would be a mistake.”

  19. David B. Benson says:

    Today’s TNYT business section had an article about oil prices: not too high, not too low, just right.

    Goldilocks?

  20. alexy says:

    I too find this distasteful to swallow. However:

    It is a multifaceted “defanging”. Obviously it is responsive to desires of “conservatives” (primarily inland Dems). It also preempts outcries due to the likely spiking of oil prices (while simultaneously avoiding any action that would meaningfully impact oil prices in the near term). Further, it can be claimed to help alleviate the deficit and balance of payments. And, it offers yet another means of portraying the opposition party as extremists, spoiled children who will be satisfied only with 100% of their ever increasing demands.

    Such a preemptive announcement makes it more reasonable to hold a hard line on opening other areas. It also allowed the choice of the areas to open, rather than being forced by contrived opinion.

    Due to the nature of the areas opened, this has the potential to provide more, higher paying and longer duration jobs than opening inland areas would.

    It should also be noted that long term (heck, even short term) forecasts from the EIA have been notoriously incorrect. While I don’t expect this action will have a meaningful impact on oil prices, it can be perceived as another “insurance policy”.

  21. ZS says:

    This is a colossal mistake.

    Leave aside the environmental consequences, along with negligible effect on domestic supply/gas prices that OCS drilling would achieve. Politically, this is indefensible.

    That Obama would agree to sell out our oceans to oil companies isn’t surprising – he mentioned it repeatedly during his campaign, and again during the State of the Union. What is mindboggling is his decision to give in NOW. Anyone paying an ounce of attention over the last year knows that this won’t affect the vote of any Republican on the Climate/Energy/Jobs bill in the Senate. It’s not a secret; they’ve been quite open with their intentions to avoid cooperation to the end. If was to be any political benefit from offshore drilling, it would have come as part the negotiation process, as a concession in return for something vital. Unless there was some sort of backroom deal that we’ll all hear about several months from now, and Obama has a secret plan (a tired meme that should’ve been forgotten for good in the wake of the watered down – again, without good reason – health care reform legislation), Obama got nothing in return for this concession. Why now?

    Kevin Drum at Mother Jones sums it up well:

    When it comes to energy, conservatives are crazy about two things: nuclear power and offshore drilling. Now Obama has agreed to both. But does he seriously think this will “help win political support for comprehensive energy and climate legislation”? Wouldn’t he be better off holding this stuff in reserve and negotiating it away in return for actual support, not just hoped-for support? What am I missing here?

    To quote Joe: “Why? Why? Why?”. It’s baffling.

  22. Ronald says:

    Closing off areas of the country to off shore oil extraction will do nothing that affects Global Warming. Oil extraction will be allowed everywhere once the price of oil gets high enough. Do you think they will allow drilling when the price of oil gets to 100 dollars a barrel? 200 dollars a barrel? 300, 400 or 500 dollars a barrel?

    The only thing we can do is create low and non carbon fuel energy systems so that eventually we won’t need oil to power the things we want to power.

    We many times have such short term thinking on energy. Maybe we can try to close off oil extraction until 2020, or 2030 or 2040, but as supplies around of world of oil drops, we will drill for that oil unless we have substitutes.

    We don’t want to just prevent Global Warming in our time, but we want to prevent Global Warming for all time. ‘Do not drill’ measures are only temporary.

  23. Ronald says:

    Why did Obama do this? Because the oil exploration bargaining chip only has value in the Republicans ever want to deal. They will pick up seats anyway and maybe more seats if they don’t deal.

  24. ZS says:

    “Why did Obama do this? Because the oil exploration bargaining chip only has value in the Republicans ever want to deal.”

    Yep. So…why not hold the bargaining chip in case they do decide to participate in the legislative process (fat chance, but hey, a man can dream), and if not…don’t concede on offshore drilling and alienate much of base that voted Obama in?

  25. Bob Wallace says:

    “When it comes to energy, conservatives are crazy about two things: nuclear power and offshore drilling. Now Obama has agreed to both.”

    Has he really?

    He bumped the nuclear reactor loan guarantee from $18 to $100 billion. Not grants, but loan guarantees.

    On this site Joe and Craig repeatedly bring the numbers to the table that show us that nuclear is not a cost effective method for making electricity. But those on the right deny the validity of those numbers (just as they deny global warming). Perhaps they need to burn their fingers so they understand the stove is hot?

    There’s no way that large corporations/utility companies will start building 10, 15 new reactors all at once. Most likely Southern Company will go forward with their two new plants in Georgia. The rest of the potential builders are likely to hang back and see how that plays out. If Joe and Craig are right (and lots of data seems to say that they are) Southern Company is going to take it in the shorts, their reactors are going to cost many billions and take many years to finish.

    If that happens then new nuclear in the US is finished.

    Don’t forget, during the 8-12+ years that it takes to bring these plants on line the cost of wind, solar, geothermal, storage, etc. will continue to fall. Even if Southern can bring their new plants on line for nuclear industry’s “pie in the sky” price, the cost of their electricity probably won’t be competitive in the 2020 energy market.

    So, is Obama boosting nuclear energy? I don’t think so. I think he’s giving them a fair chance to prove their point. And a big chance to massively fail.

    Then opening up the Virginia coast for drilling. I’ve been giving this some more thought.

    Isn’t Virginia a hot bed of teabaggers and Republican resistance? Aren’t these the folks who are really pushing for more US ocean drilling?

    Well, if they are so gung-ho for drilling, where better than in their back yards? Why should we, in other states, have to host their rigs when they have perfectly good shorelines to screw up?

    And, once drilled, what do we do with that oil? I guess we’ve got to build a bunch of terminals and refineries in Virginia, don’t we?

    Already today I’ve heard Virgina political types come out against drilling off Virginia’s coast. Could ruin their beaches and tourist industry. (Remember how Jeb Bush got his brother to block drilling off the Florida beaches?)

    I’m thinking that opening up the waters off the Capital of the Confederacy was an excellent chess move. I think it lowers the probability of drilling in any new US waters….

  26. paulm says:

    Bob 26#, totally had the same sort of impressions.

  27. Sean says:

    Can someone help me out by answering the following question:

    If oil companies already have access to billions more barrels of offshore oil than they will ever even try to extract, why do they keep pushing for more drilling rights? Why would they give campaign contributions to congressmen to open up new areas for drilling when they don’t even plan to use them because they already have multiples of what they plan to use? Why do they pay (perhaps too little, but it is real money) for these leases if they don’t plan to ever use them?

    If it’s all just a pointless ruse, where’s the benefit that they think they will be getting for their money?

  28. Dean says:

    Whether or not you think this is worth it for support for a climate bill and broader energy bill, the question is whether Obama has some private quid pro quo promises for such support as a result of doing this. If the Senate has figured out some way to put key energy reforms into a reconciliation bill, they would only need Dem support to pass it. If they can pull one Republican, they wouldn’t need reconciliation. The most typical Republicans to switch for environmental causes are from Maine, but I doubt coastal drilling is popular in Maine. Are any offshore areas from Maine included? But new drilling will include areas off Senator Graham’s state’s coast. Might he be a single Republican considering breaking on this issue?

  29. Eugene says:

    This was a smart move by Obama. Basically, there is no practical long-term way to prevent off-shore drilling. Politically, it is going to be a losing position. The next gas price spike and this issue would be used to tar-and-feather environmentalists. After that has occurred, off-shore drilling will be opened up. You don’t do stuff like that if you want to have any effect on policy. You are not going to be effective on this issue over any extend period of oil crisis, which is exactly what we are going into. There is clearly no practical way to continue to prohibit off-short drilling long term. If you really care about these issues, then don’t support a bunch of losing causes.

  30. Marita says:

    It is indeed a losing cause, not just with regard to peak oil and pollution, but to diminishing health in humans and countless other species and ecosystems. If we took in the external costs of fossil-fuels, gas would cost $10/gal in the US and would have us all contemplating the value of public transportation, bicycles and honed legs.

    http://www.ecohearth.com/eco-op-ed/1338-obama-offshore-drilling-is-a-bridge-to-the-us-energy-future-try-a-stretcher.html

  31. Bob Wallace says:

    I’ve been wondering…

    If we are truly concerned about *global* issues, might it be better to do our drilling off our shores where environmental controls are likely to be stronger than off the shores of some country in South America or Africa where there may be little or no control?

    And there’s the fuel saved when we drill closer to the point of use….