28 May 2010

Offshore Drilling Realities

Earlier this week, Senator John Kerry (D-MA) dresses down someone (who, I wonder?) for apparently showing a lack of understanding of the realities of oil exploration in the Gulf of Mexico:
Now we are not going to stop drilling in the Gulf tomorrow, folks. Let’s be realistic. There are 48,000 wells out there. One of them went sour. About 30 percent of our transportation fuel comes from the Gulf. You think Americans are going to suddenly stop driving to work tomorrow? Do you think people are going to stop driving the trucks to deliver the goods to the department stores? Not going to happen.
Today's FT Lex Column offers some additional realities:

US regulations could become so onerous that offshore activity dries up in North America, but this would boost the appeal of fields off West Africa, Brazil and in the Barents Sea. And, though it seems callous with crude still fouling the Gulf, keeping North American offshore drilling viable may pose less environmental risk than other options. Incremental barrels would come from abroad by tankers statistically more likely to spill, or from ecologically damaging oil sands, today’s marginal supplier.

The economic attractions of offshore drilling are just too compelling for the industry to be spooked even by BP’s debacle. Oilmen will go where the oil is, however painful their burns.

It speaks to the perverse counter-intuitive nature of energy and climate policies that the best-intentioned actions -- strengthening US drilling regulations, could lead to greater environmental risks and do nothing to address carbon dioxide emissions. Policy design desperately needs to catch up with real-world complexities.