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William Lloyd

May 13, 2012

William Lloyd | Who will benefit from GOP's 'drill, baby, drill'?

In a recent robocall, former Arkansas Gov. Mike Huckabee solicited support for a conservative organization that advocates total U.S. energy independence through increased domestic oil drilling. If Huckabee’s solicitation is successful, we can expect to see another wave of negative ads blaming President Obama for higher gasoline prices.

Before his departure from the presidential race, former House Speaker Newt Gingrich touted a plan to lower prices to $2.50 per gallon through a marked increase in drilling. Although he has not been as grandiose as Gingrich, Republican presumptive nominee Mitt Romney has also promised lower prices.

According to the Republicans, the president’s “extreme environmental agenda” is standing in the way of what must be done:  “Drill, baby, drill.” Despite the Republicans’ catchy slogan, the issue is not nearly so clear-cut.

There is a balance to be struck between developing natural resources and protecting the environment. It is a given that Romney would be more favorable toward development and less protective of the environment than Obama.

However, catastrophic oil spills have happened and are likely to happen again. Therefore, before they jump on the “drill, baby, drill” bandwagon, voters should recall some history.

A 1969 drilling rig accident off Santa Barbara, Calif., helped spark the rise of the environmental movement.  

That accident was also a major catalyst for the establishment of the Environmental Protection Agency during the administration of President Nixon. In addition, it led to restrictions on off-shore drilling that were signed into law by President Reagan.

Similarly, the Exxon Valdez tanker accident in Prince William Sound, Alaska, in 1989, led President George H. W. Bush to sign a law strengthening the federal government’s role in preventing and responding to oil spills.

What did Nixon, Reagan, and Bush have in common?

They were all Republicans who would be radical environmentalists if judged by today’s GOP measuring stick.

Just two years ago, an explosion on a BP oil rig killed 11 workers and caused a three-month leak into the Gulf of Mexico. The Obama administration responded by requiring additional inspections of existing wells, imposing a temporary moratorium on new drilling and promulgating tougher rules for well permitting and operation.

However, Republican leaders, instead of reacting as previous presidents of their party have done, criticized Obama’s actions and doubled down on their strategy to increase drilling.

Even assuming the public is willing to accept the environmental risk of the Republicans’ strategy, the economic benefits are questionable.

Gasoline prices in the U.S. are highly dependent on the price of oil on the world market. As Americans should have learned from the Arab oil embargo in 1973-74, oil is not traded in a free market.  

Although the price of oil is a function of supply and demand, the Organization of Petroleum Exporting Countries has substantial leverage over that price because of member countries’ ability to increase or decrease their production to gain political or economic advantage. Just as OPEC can lower world oil prices by increasing supply, they can keep world prices from falling too far by offsetting increased U.S. production with reductions in their own output.

It is theoretically possible to achieve Huckabee’s goal of total independence from foreign oil through increased domestic production. However, it would be necessary to prohibit domestic well owners from exporting oil until U.S. demand has been completely satisfied. To achieve significant relief at the pump, it would also be necessary to require domestic well owners to produce oil and sell it in the U.S. for less than they could make by selling at the world market price. It would be shocking if the party of less government and free trade really intends such a massive federal intervention in the economy under a Romney presidency.

Despite what the Republicans claim is his “extreme environmental agenda,” domestic oil production has actually gone up in each year Obama has been president.

Under the Republicans’ theory, that increase in domestic production should have led to lower gasoline prices than when Obama took office.  

However, as the television ads remind us, prices are significantly higher now than they were then. Therefore, the evidence shows that more drilling is not a guarantee of lower prices.

In view of the environmental risk and the questionable benefit to consumers, one can only wonder if the real goal of “drill, baby, drill” is to reward Republican campaign contributors in the oil industry.

William Lloyd represented Somerset County in the state House of Representatives (1981-1998) and served as the state’s small business advocate (November 2003-October 2011). He is a resident of Somerset Borough.

 

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