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Susan Walsh/AP
An off-shore oil rig off the coast of
Louisiana damaged by Hurricane Rita. (AP)
An off-shore oil rig off the coast of
Louisiana damaged by Hurricane Rita. (AP)
Bush Lifts Offshore Drilling Ban, But No Lift for Drivers
July 15, 2008 10:41 AM
President Bush announced the end of the executive ban on offshore oil drilling, but Congress must still lift its legislative ban for drilling to commence.
30-Second Summary
President George W. Bush rescinded an executive ban on offshore drilling Wednesday and called for Congress to follow suit. “This means that the only thing standing between the American people and these vast oil resources is action from the U.S. Congress,” Bush said.
The current Congressional ban expires September 30. The White House has urged Congress to give states the right to decide whether there can be offshore drilling of their coastlines.
There has been a federal moratorium in place since 1981, instituted by Congress in response to Interior Secretary James Watt’s plan to expand offshore drilling. In 1990, President George H.W. Bush instituted an executive ban on drilling.
President Bush has spoken against the ban since arriving in office in 2000. He has gained support over the past several months, as high oil prices have driven the cost of gas above $4 a gallon. Republican presidential candidate John McCain ended his long-time opposition to drilling last month.
Opponents to the drilling argue that lifting the ban will have little to no effect on oil prices, as it will take several years before drilling can even begin. Even then, they contend, the price of oil will not drop significantly.
Wednesday’s decision is largely symbolic, both because Congress has yet to act and because of the years it would take to begin drilling. However, several economists believe that the mere perception that oil prices will drop in the future will be enough to lower oil prices in the short-term.
The current Congressional ban expires September 30. The White House has urged Congress to give states the right to decide whether there can be offshore drilling of their coastlines.
There has been a federal moratorium in place since 1981, instituted by Congress in response to Interior Secretary James Watt’s plan to expand offshore drilling. In 1990, President George H.W. Bush instituted an executive ban on drilling.
President Bush has spoken against the ban since arriving in office in 2000. He has gained support over the past several months, as high oil prices have driven the cost of gas above $4 a gallon. Republican presidential candidate John McCain ended his long-time opposition to drilling last month.
Opponents to the drilling argue that lifting the ban will have little to no effect on oil prices, as it will take several years before drilling can even begin. Even then, they contend, the price of oil will not drop significantly.
Wednesday’s decision is largely symbolic, both because Congress has yet to act and because of the years it would take to begin drilling. However, several economists believe that the mere perception that oil prices will drop in the future will be enough to lower oil prices in the short-term.
Headline Link: Bush lifts ban
Bush took several shots at the Democratic majority in Congress. “It’s been almost a month since I urged Congress to act, and they’ve done nothing,” he said. “As the Democratically-controlled Congress has sat idle, gas prices have continued to increase.” Democratic leaders denounced the decision as a “political stunt” and a “hoax.” Sen. Barbara Boxer, D-Calif., said, “The president is desperately trying to divert responsibility for outrageous gas prices from himself to the Congress.”
Source: The Washington Post
Background: Support for offshore drilling
Support for offshore drilling has increased as oil prices continue to reach record levels. Republican presidential candidate John McCain had been opposed to offshore drilling, but changed his position on June 17. “We have proven oil reserves of at least 21 billion barrels in the United States,” he said. “But a broad federal moratorium stands in the way of energy exploration and production. And I believe it is time for the federal government to lift these restrictions and to put our own reserves to use.”
Source: CNN
On June 18, Bush called for Congress to end the offshore drilling ban and to open up Alaska’s Arctic National Wildlife Refuge for exploration. He stopped short of rescinding the ban because he wanted to act “in tandem” with Congress.
Source: The New York Times
Historical Context: Offshore drilling bans
In 1981, Interior Secretary James Watt offered “practically the entire outer continental shelf to oil-company bidders.” In response, Congress enacted a temporary moratorium on offshore drilling that has been renewed every year since.
Source: Time
Bush is lifting the executive ban on offshore drilling originally instituted by his father in 1990. It was renewed in 1998 by President Clinton.
Source: The New York Times
Opinion & Analysis: Will drilling affect oil prices?
Time’s Bryan Walsh writes that drilling will have no short-term effect and only a small long-term effect. He quotes a Natural Resources Defense Council estimate that drilling will lower the price of gas by “3 to 4 cents a gallon at most” and writes, “At best, greatly expanding domestic drilling might eventually lower the proportion of oil the U.S. imports—currently about 60% of its total supply—but petroleum is a global commodity, and the world market would soak up any additional American production.”
Source: Time
Martin Feldstein, former chairman of the Council of Economic Advisers, writes that oil producers have been holding back their oil supply because they expect prices to continue rising dramatically. If there is reason to suspect that prices will drop in the future, producers will release more of their oil to capitalize on today’s high prices before the market dips. “Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today’s price of oil with policies that will have their physical impact on oil demand or supply only in the future.”
Source: Wall Street Journal
David A. Ridenour, vice president of The National Center for Public Policy Research, believes that drilling will drive down oil prices by lowering investor speculation. “But while production may be years away, the decision to drill will immediately burst the oil bubble created by investor speculation,” he writes. “As long as investors expect demand for oil to grow and supplies to remain the same or shrink, they’ll continue using oil as a hedge against the devaluing dollar. Drilling would change all that.”
Source: Hartford Courant
Henry Lee, director of the Environment and Natural Resources Program at Harvard University, does not think that drilling will have an effect on the oil futures market. “Most of your futures markets range between a few months into the future to a couple of years into the future. If you go beyond three years, that market is very thin and most of the people who are playing in the futures market are not playing in the 10-year futures market, they’re playing in the 6-month futures market.”
Source: NPR
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