It's no mystery why politicians are interested in opening up the areas off our coasts to oil exploration and development. Four-dollar gasoline has driven Americans to near madness, and the public's fervent wish to bring down gasoline prices is the politician's command. Adding new supply to the market is one sure-fire, hard-to-argue means of doing exactly that.
The U.S. Energy Information Administration (EIA) — an analytic arm of the U.S. Department of Energy — reported last year that removing all offshore drilling restrictions would liberate about 18 billion barrels of petroleum at a rate of about 200,000 barrels a day. About 10 billion barrels of that oil, however, is thought to be off the California coast, which is important to keep in mind given John McCain's caveat that states should be allowed to say "no" to drilling in federal waters off their coasts.
If the EIA is right, then we're talking a trivial amount of new crude in global terms. Global oil production last year averaged about 86 million barrels per day. If global oil production were at that rate when this new 100,000 barrels of oil hit the market (roughly the EIA's estimate minus California), it would increase global supply by all of one-tenth of 1%. If the oil market reacts then as it has in the past when new supply hits the market, this would translate into reduction of one-fifth of 1% in world crude oil prices over the long term. Even if California were to allow drilling, we're still well short of even a 1% reduction in price.
But the EIA may not be right about the extent of the oil at issue.
First, the EIA determined what was technically recoverable in part by estimating how much of this new oil could be economically exploited were prices at $50 a barrel in 2005 dollars. If we assume that oil prices will be higher in the future, then what is "technically recoverable" will surely go up.
Second, most of the waters in question have never been thoroughly explored. How much economically recoverable crude oil is yet to be found in the 85% of U.S. coastal waters currently off limits to the industry is thus unknowable. We can guess, of course, but those guesses are based on very limited information.
But think twice before arguing that there's probably not enough undiscovered oil off shore to substantially reduce gasoline prices. Only monster fields cross that threshold, and if we eschewed drilling everywhere else, global oil production would only be a fraction of what it is today. Likewise, arguing against drilling because the oil will take a decade or more to come to market in significant volumes — which is likely correct — is an argument against acting today to head off problems tomorrow.
You might, of course, want to argue that the environmental risks are greater than the energy rewards. For the sake of argument, let's assume that the EIA is right and 18 billion barrels of oil are at stake. And let's further assume that the oil could be sold for an average price of $100 a barrel. How likely is it that the cost of the environmental damages associated with this incremental increase in oil production would exceed $1.8 trillion? If it did not, then the environmental risks were worth taking.