Obama's new offshore drilling plan won't cut gas prices

President Obama announced Wednesday he will open parts of the southern Atlantic coast and Alaska to offshore drilling. But don't look for gas prices to fall.

Mary Altaffer/AP Photo/file
The Chevron Genesis Oil Rig Platform is seen in the Gulf of Mexico near New Orleans in August 2008. Reversing a ban on oil drilling off most US shores, President Obama announced an expansive new policy Wednesday that could put new oil and natural gas platforms in waters along the southern Atlantic coastline, the eastern Gulf of Mexico, and part of Alaska. Any new drilling wouldn't have much impact on gas prices, however.

Consumers thinking that President Obama’s support for offshore drilling might cut gas prices are likely to be disappointed.

Mr. Obama announced Wednesday that the US would permit oil and gas exploration on its southeast coast, running roughly from Delaware to Florida, including a new area in the eastern part of the Gulf of Mexico. A portion of the Alaskan coast will be opened as well.

It was a decision the president said he made reluctantly.

“In the short term, as we transition to cleaner energy sources, we’ve still got to make some tough decisions about opening new offshore areas for gas and oil development in ways that protect our communities and protect coastlines,” Obama said, speaking from Andrews Air Force Base in Maryland. “This is not a decision I’ve made lightly.”

Congress would have to take further steps before actual drilling could take place off of Florida's western coast.

Any oil produced from such drilling may be a small step toward reducing America’s dependence on foreign sources of oil, as Obama stressed. But it won’t make much of a dent in US and global oil markets.

Quantities produced are “likely to be well below 1 percent of global oil supply,” says Steven Kopits, managing director of Douglas-Westwood, an energy analysis firm.

Moreover, it will take approximately seven to 10 years for the oil to reach the market.

“With the volumes we can anticipate, and given the time it will take to develop, it probably isn’t that material,” says Mr. Kopits.

Instead, benefits will come in the form of job creation and tax revenue, says Kopits, as well as giving the offshore wind industry a boost.

“There’s no supply chain built out at all on the eastern coast for wind,” says Kopits. That makes for high hurdles for companies wanting to tap the power of sea breezes.

But such projects could piggyback on the construction of offshore drilling rigs, if the president's plan spurs oil companies to begin looking for oil off the Southeast's Atlantic coast.

In political circles, oil and wind don't mix. But on the ground, parallel construction projects could save the wind industry roughly 25 percent.

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