Will Offshore Drilling Lower Gas Prices?

Posted: July 16, 2008

President Bush has lifted an executive ban on offshore oil drilling, the price of oil has seen its steepest one day drop in 17 years, and the price Americans pay at the pump is… 

Not budging. 

The AP reports, "President Bush on Monday lifted an executive ban on offshore oil drilling and challenged Congress to follow suit, aiming to turn the enormous public frustration about gasoline prices into political leverage. Democratic lawmakers rejected Bush's plan as a symbolic stunt."  

Bush argues that lifting the offshore drilling ban would send an important psychological signal to markets, which could ease oil prices.  According to NPR, "The Department of Energy says there may be 18 billion barrels of oil in coastal waters, but they also say that drilling for it would not have a significant impact on production or prices until 2030."  Oil industry insiders "say drilling won't ease the oil pinch." Matthew Simmons, President of energy investment bank says, "It's really misleading to hold that out as a panacea. It won't work. It might work for our grandchildren."

The AP cautions, "The president's direct link between record gas prices and offshore drilling glossed over a key point. Even if Congress agreed, the exploration for oil would take years to produce real results. It is not projected to reduce gas prices in the short term. Even the White House routinely emphasizes there is no quick fix."   

In fact, even a sharp drop in the price of oil doesn't seem to shake gas prices in the short term.

CNN Money reports, "Oil prices plummeted by the second-largest margin on record Tuesday as investors feared a further decline in U.S. demand."  The price drop was seen as a reaction to comments by Federal Reserve Chairman Ben Bernanke, warning that "high energy prices have helped to limit the purchasing power of U.S. households." 

Despite Bush's announcement and the drop in oil prices, however, CNN reports, "Gasoline prices in the U.S. maintained record highs at $4.109 a gallon Tuesday."

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