Opening up federal land and its effects on oil prices

The debate over whether or not to open up federally protected areas, such as the Arctic Refuge here in Alaska, and allowing more offshore oil drilling is really starting to pick up. Both President Bush and John McCain--though McCain has been a lifelong opponent of offshore drilling until this year--are advocating opening up anywhere that has natural gas or petroleum. Meanwhile democrats such as Harry Reid and environmentalists are questioning the value of opening up these areas. So what are the economical benefits of opening up this land?

Well according to the Energy Information Administration (which is a government agency) opening up the Arctic Refuge would lead to oil prices being 75 cents less...per barrel...in 2025. Also according to EIA is that opening up offshore drilling areas would lead to to an increase of 1.6% by 2025 in domestic oil production, which would lead to an "insignificant" price in oil prices. These are reports put out by a government agency; not environmental groups.

The only people who would benefit from opening up these areas are oil companies. There would be no significant change in cost to the consumer. I don't have the knowledge to predict what a barrel of oil will cost in 2025, but I think we can assume it will be high enough that 75 cents isn't going to make a difference to most people. In fact a general rule of thumb is that a dollar change in the price of a barrel of oil corresponds to a 2.5 cent change in a gallon of gas.

Over the past two years domestic oil and gas production has outpaced domestic consumption fourfold. There just is no correlation between domestic production and the cost of gas for Americans. Oil is an international product and its price is determined on the international market. The oil that is in American soil is sold to international companies.

Another point that needs to be made is that oil companies already have more leases to reserves than they are using. As Peter Lehner of the National Resource Defense Council points out: in the past four years the BLM has issued 10,000 more permits to oil companies than they have used. There is six times more oil currently available for drilling than is located in the Arctic Refuge. As for offshore drilling, there is currently 7,740 active leases, of which 1,655 are in production. There is four time more natural gas in those leases not in production then in the areas protected by the offshore ban.

All that said, energy independence is very valuable. However, oil and natural gas are not the answer. The easiest and most cost effective route is to be more energy efficient. Smart building practices can significantly lower energy demand, to the point that, with some small scale renewable energy systems, zero energy buildings are currently possible. Sweden plans to be completely off oil by 2020. The United States has the ability to become a leader in the renewable energies market, which as oil prices soar will become a very lucrative market. Any plan that is centered on increased oil production is bound to fail. The impact that drilling will have on the economy is minuscule, in fact oil prices will continue to sky rocket no matter what. Renewable energy sources will always be available, so why not develop them?