Drill Baby Drill? It Won’t Lower Gas Prices.

by Stuart Shapiro

With gas prices rising and turmoil throughout the Mideast, the debate of whether to open up new US fields for drilling has been joined again.  Prominent in 2008 (Drill Baby Drill!) and 2010 (Spill Baby Spill!), the most common justification for increased domestic drilling is to lower gas prices.  A new report argues that such drilling will have no effect on what we pay at the pump now or in the future:

Economic analysis of oil markets shows that expanding domestic oil production is “not likely [to] have a signifi cant impact on prices that consumers pay at thegasoline pump now or in the future.”  Because the United States is engaged in global oil markets, even relatively large domestic changes in production will be swallowed by the larger global supply and demand, leading to only negligible changes in price.

The report goes on to argue that the relevant factors in decisions to lease land for drilling should be the possible revenues the oil will produce and the costs both to produce the oil and to the environment.  And unless we do this correctly, the result will be too much drilling.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.