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The Effects of Oil Drilling

August 6, 2008

Division of Labour contributor EF Stephenson discusses how to get Democrats to agree to offshore drilling in one of his latest posts. I agree with most of his comments in theory; however, I have contention on one point. He states:

‘Regardless of any effect increased drilling may have on current prices, it is still worthwhile policy. Even if it takes five or ten years for new drilling to expand the flow of available oil, the increased supply of oil will make future prices lower than they would otherwise be.’

If the future prices are driven down preciptously enough (or at all), how can we then encourage and increase incentives to create new forms of energy techology that will reduce our dependence on scarce resources? (I’m operating here off of the assumption that consuming, even in reduced quantity, scarce and limited natural resources is not sustainable – environmentally or economically – in the long run.) Stephenson notes:

‘Higher gas prices lead people—almost as if they are guided by an invisible hand–to drive less, to buy more fuel efficient vehicles, and to make a myriad of other changes. Even if drilling is permitted, the strong possibility of higher future prices is likely to provide an incentive for continued fuel conservation and for the development of new technologies.’

 While I agree that individual consumers who feel the brunt of the gas crunch are more likely to change their behavior, I am skeptical that the necessary technological advancements will be made by those that are now involved in the energy industry. Even at $4 a gallon or more, consumers have barely curbed their consumption, certainly not enough to have an noticible impact of those with the money to do research – the oil companies. Because petroleum companies (and the government officials who are in their pockets) have a large incentive to continue to produce petroleum products and to keep the general public in need of those products, it seems as though any decrease in the price of gasoline, whether now or in the future, will have an adverse effect in the long run. Until the price of gas is high enough to severely hinder consumption or until the incentives on the compnaies and Congressmen are changed, the state of our nation’s “fuel crisis” is likely to remain the same – offshore drilling or not.

The point in short? Don’t bother drilling – just keep increasing gas prices until the price is high enough to decrease consumption in a manner that will change the incentives for government officials and petroleum producers, so that we can finally have clean, sustainable, and relatively more afforable technology.  Supply and Demand to the rescue!

One Comment leave one →
  1. August 6, 2008 3:31 pm

    Great Blog post. I am going to bookmark and read more often. I love the Blog template if you need any assistance customizing it let me know!

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