President Barack Obama recently directed his administration to expedite U.S. oil production by extending existing leases in the Gulf of Mexico and off the coast of Alaska for an additional year, speeding up environmental reviews of proposed leases along the Atlantic coast of the United States, and holding more frequent lease sales in the National Petroleum Reserve on Alaska's North Slope.
Ostensibly, the point of all this frenzied activity is to reduce U.S. dependence on imported oil and to lower gas prices for consumers who are fed up with paying $4 for a gallon of gasoline. Ironically, Obama's push to give oil companies greater access to U.S. oil reserves won't accomplish either goal.
"There is practically nothing that Washington can do that would materially change the price of fuel in this country," said Oil Industry Analyst Pavel Molchanov in an interview with the Associated Press.
Why Gasoline Prices are Up
Gasoline prices have gone up during the past few months for a variety of reasons, starting with volatile conditions in the Middle East and North Africa that affected global supply and demand and motivated investors to funnel more money into commodities. Refinery shutdowns also contributed to higher prices, along with federal regulations that require refineries to produce expensive summer gasoline blends that evaporate less easily.
If the U.S. government immediately offered new leases in Alaska, the Gulf of Mexico and along the Atlantic coast, it would take a year or more for oil companies to start drilling and (assuming they actually found oil) another five years to start shipping barrels of crude oil to refineries.
"Even if all that works out, it still would not materially change global oil supply, and therefore would not materially change fuel prices in this country or any other," Molchanov said. "In the grand scheme of things, none of this changes the reality of $4 gasoline at the pump."
Will New Policies Reduce Foreign Oil Dependence?
In announcing his new policies, Obama acknowledged that they won't help to immediately lower gasoline prices. Nevertheless, he said the measures "make good sense" and would help to reduce U.S. consumption of foreign oil long-term.
Well, maybe not.
The United States produces about 5 percent of the world's crude oil, but consumes about 20 percent.
"Given that imbalance, there is simply no policy shift that could plausibly come from the federal government that can significantly change that dynamic," Molchanov told the AP.
And with U.S. demand for oil increasing every year, the idea that we're going to lower our dependence on imported oil simply by producing more oil domestically is a bit far-fetched.
The Politics of Oil
It's not surprising that President Obama would support a return to more U.S. oil exploration and production. He has always favored increasing domestic oil production, so long as the proper safeguards are in place. But that's one of the big questions raised by his current action. Many of the safety recommendations made by the presidential commission Obama appointed following the deadly BP Deepwater Horizon explosion and oil spill last year have not been implemented, even though Obama said he would hold off on expanding U.S. oil production until they were.
So if increasing U.S. oil production now won't lower gasoline prices and won't reduce U.S. dependence on foreign oil, then why the rush? Politics, pure and simple.
Consumers (read that "voters") are upset about high gas prices and concerned about national security. President Obama is feeling pressure from Congress, industry lobbyists and the American people to come up with solutions.
In the world of politics, taking action that doesn't actually solve the problems is still better than taking no action at all. President Obama should remember, however, that political expediency has a tendency to backfire.
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