President Bush lifts ban on offshore oil drilling 

Opinions differ on benefits, potential to increase supply and reduce prices

Jeff Berman, Group News Editor -- Logistics Management, 7/15/2008

WASHINGTON—President George W. Bush announced yesterday he will lift the executive ban on offshore drilling for oil, which he said will allow for increased domestic oil exploration if Congress lifts its current ban on offshore drilling.

Along with the Congress ban on offshore drilling, a ban was implemented by President George H.W. Bush in 1990. In a press conference yesterday, Bush said Congress needs to take action to expand domestic oil production at a time when oil is approaching $150 per barrel and the price of a gallon of diesel gas is more than $4.70. He added that by increasing access to offshore oil exploration on the Outer Continental Shelf is one of the “most important steps” taken to expand American oil production.

“The only thing standing between the American people and these vast oil resources is action from the U.S. Congress,” said Bush. He also said that Experts believe that these restricted areas of the OCS could eventually produce nearly 10 years' worth of America's current annual oil production. And advances in technology have made it possible to conduct oil exploration in the OCS that is out of sight, protects coral reefs and habitats, and protects against oil spills.

Various media reports have suggested that there are pros and cons to the notion of offshore drilling. While the White House contends that it is needed in order to drive down rising energy and transportation expenses, past Presidents and Congress have opposed offshore drilling in order to protect beaches and coastal states; tourism economies. U.S. Speaker of the House Nancy Pelosi labeled this concept as a “hoax,” saying the White House is echoing the demands of large oil companies, because it will not reduce gas prices or increase energy independence.

Reed Business Information Chief Economist James Haughey told LM that lifting this ban is symbolic only, saying it just a way to be sure everyone knows that Congress is now the entity that is preventing offshore drilling. 

The Associated Press reported that White House officials said while offshore drilling would not have any immediate action on gas prices, it still makes sense to take action.

“The practice of drilling for additional oil in North America has the promise of adding additional supply some 8-15 years from now, and some of the suggestions shouldn’t be dismissed just because of political heel digging,” said Tom Kloza, publisher and chief oil analyst of Oil Price Information Service, a petroleum pricing and news information service. “But neither side of the aisle recognizes that a solution requires a myriad of action—less demand, more supply, some behavior tilting for excessive users, and incentives to use sensible alternatives or even emphasize mass transit, [among other options]. The American public isn’t a beneficiary when republicans emphasize ‘drill, drill, drill’ and the democrats simply want to ‘tax the evil oil companies.’”  

As has been widely reported, the ongoing fuel spikes have had a significant effect on freight transportation operations—especially trucking—from a costs and operations planning perspective. Last week, American Trucking Associations Senior Vice President Tim Lynch testified before the House Committee on Agriculture, calling on Congress to implement a comprehensive plan to address fuel prices and ensure an affordable supply for America’s 3.5 million truck drivers, as well as consumers. “The fuel crisis we face today is severe,” Lynch said in his testimony. “There is no one single solution to high oil prices. We need to conserve fuel and increase oil production to emerge from this crisis. But neither of these in itself is a total solution. Congress must embrace a multifaceted approach to solving this problem.”

Lynch said this plan needs to make transparent petroleum markets free from excessive speculation and manipulation, cut petroleum demand, and expand petroleum supply.

An ATA statement released last week contained several measures which could reduce overall demand for oil and increase domestic oil supplies. These measures included: establishing a national diesel fuel standard; allowing environmentally-responsible exploration of oil-rich areas in the U.S. that are now off limits; continuing to fund the EPA’s SmartWay Transport Partnership Program, which encourages fuel-savings strategies; requiring speed limiters set for 68 mph or lower on all new trucks, and setting a national maximum speed limit of 65 mph, among others.