LIEBERMAN: No time for an oil crackdown

By Ben Lieberman | Monday, January 5, 2009

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COMMENTARY:

How does $8-a-gallon gas sound? Few Americans would want to see that happen. Unfortunately, President-elect Barack Obama's choices for the governments two highest energy posts have expressed a surprising level of comfort with sky-high gas prices.

As if that weren't bad enough, the incoming Obama administration and new Congress have suggested they may reverse the pro-domestic oil drilling measures enacted since last summer. It is starting to look as though the change coming to Washington will bring bad news at the pump in the years ahead.

As gas prices topped $4 a gallon last July, President Bush revoked the longstanding executive order that outlawed oil exploration and drilling in 85 percent of Americas territorial waters - nearly everywhere off the "Lower 48" except Texas and Louisiana. Congress followed up by allowing its own 27-year-old offshore moratorium to lapse on Oct. 1.

These outdated restrictions should never have stayed on the books for so long - the risk of oil spills has been dramatically minimized with the latest technologies. But at least Washington did the right thing by belatedly getting rid of them.

Thus, the leasing process can commence in areas estimated to contain 19 billion barrels of untapped oil - about 30 years of current imports from Saudi Arabia. And, it should be noted, these initial estimates tend to be on the low side. We may well find much more oil.

Earlier in the year, then-candidate Barack Obama and leading Democrats in Congress opposed this expansion of domestic oil drilling. However, both relented in the face of last summer's public outrage over $4-a-gallon gas, as well as polls showing 2-to-1 support for more drilling.

But, as they say, that was then. Since the election, both the incoming administration and Congress have signaled they may reverse position and undo this policy. And two key Obama appointments may want to go further.

Sen. Ken Salazar, Colorado Democrat and Mr. Obama's nominee for interior secretary, was on record as opposing lifting the offshore moratorium even if gasoline were to reach $10 a gallon. The Interior Department runs the federal energy-leasing programs. As secretary, Mr. Salazar would have the power to slow such leasing to a crawl, with or without the help of Congress.

In fairness, Mr. Salazar strongly opposed offshore drilling but never said he actually wanted the price of gas to skyrocket. The same cannot be said of Energy Secretary-nominee Steven Chu. Last September, he told the Wall Street Journal that "somehow we have to figure out how to boost the price of gasoline to the levels in Europe." European gas taxes are much higher than in the United States and are designed to force people to drive less, or not at all. At the time of Mr. Chu's comment, the "levels in Europe" were above $8 a gallon.

Beyond restoring the ban on offshore drilling, the Obama transition team is also considering adding to the restrictions facing onshore drilling, something Mr. Salazar has pushed for in the Senate. He has also been instrumental in placing regulatory roadblocks in front of oil shale in Colorado and other states where this alternative energy source exists. Though the process of extracting oil from shale is still being developed, if successful it could produce hundreds of billions of barrels of oil - enough to supply the United States for many decades.

Being so stridently anti-energy may not be the political poison it was last summer now that gas prices have plummeted by more than half. Nonetheless, this is not the time for complacency about oil supplies. The main reason for the price decline - a slumping economy that has dampened demand - is one that few expect (or want) to last forever. If we don't get serious about expanding oil production, pump prices could go back up as soon as the economy starts to turn around.

In all likelihood, we have not seen the last of $4-a-gallon gas. Imagine if we return to that level - and the consumer anger that accompanies it - perhaps as soon as 2010. How will the public feel about an Obama administration and Congress that came in and instituted a sweeping crackdown on domestic oil supplies?

Ben Lieberman is senior policy analyst in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation (heritage.org).

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