Offshore Drilling: A Bad Idea

First John McCain and now President Bush have announced support for lifting the ban on offshore drilling along America’s coastline in response to the rise in gas prices. This is an idea that only an oil man could love, but then, of course, Bush is an oil man so we should not be surprised. McCain’s decision is more difficult to understand. The rise in oil prices has something to do with the laws of supply and demand. The war in Iraq seriously disrupted oil coming from that country, but the same thing happened after the Gulf War in 1991, with no appreciable rise in prices. Iraq is currently producing 2.5 million barrels per day, which is less than the 3.5 million barrels it produced in 1990, but far exceeds the 300,000 barrels produced in the immediate aftermath of the Gulf War. The main problem has to do with speculation. Even fans of the market economy have to recognize the evil influence of speculation in today’s energy markets. Speculators buy what they do not intend to use because they believe the price will rise for the commodity purchased. With the rest of the stock market edgy and the dollar at its weakest level in years, smart investors have rushed to the oil market, but that rush only pays off for them if the price continues to rise. And, because of arcane and ineffective regulatory measures, the government has been unable to stop the cycle. Feeding the beast with new oil reserves will not lower prices anytime soon if at all because of the size of the market. In 1869, two speculators tried to corner the gold market, and the government intervened at the last minute to break their hold. But, the government’s gold reserves were greater than the entire available market, so the price crashed quickly and the speculation ended, with consequent disastrous effects on the rest of the economy. The amount of oil that could be drilled off America’s coast is not enough to have that kind of effect. The current high price of oil is an invitation to America to rethink many things: how we regulate the futures market, how we build cars, why we have such poor public transportation in most cities and between cities, the role our dependence on foreign oil plays in giving vast sums of money to unstable, dictatorial regimes from Caracas to Riyadh. The bandaid of offshore oil would further delay these necessary changes. McCain says he is still opposed to drilling in the Arctic National Wildlife Refuge because that region is pristine. I suspect that homeowners in Florida and California think their coastlines are pristine as well. They are certainly susceptible to irreparable environmental damage in the event of a spill. Why would anyone risk that environmental damage for a quick fix? Which raises another question: When did McCain’s "Straight Talk Express" veer off the road? Michael Sean Winters