Drilling off the California Coast

George Skelton, the veteran political reporter for the LA TImes has an interesting column this morning advocating offshore drilling. His column makes a lot of sense. When we adopted the ban on offshore drilling we imported only about a quarter of our oil now we import close to 70%. He goes on to point out that we produce only 39% of the crude oil we use, in part because of the offshore ban, and we are the biggest consumer of gasoline and diesel. He characterizes us as "slackers not pulling our weight." We will, according to Skelton, if we drop the ban Anyway, "not be shaping our foreign policy to assure a steady supply from shifty overseas sellers."

I think Mr. Skelton is right but for the wrong reasons. According to the UN's Food and Agriculture Organization we (and Europe) account for about 32% each of banana imports in the world. We do that because they don't grow very well in most parts of the US and because other countries can grow them more efficiently and cheaply. We are very banana dependent. Indeed, Edgar E. Blanco, a research scientist at the MIT Center for Transportation and Logistics, is working with Chiquita Brands to reduce our "carbon footprint" caused by transporting all those bananas to our markets.

If we choose not to produce something it can be for one of two reasons. First, we can make the choice, as we seem to do for bananas, that someone else can produce them better than we can - a classic division of labor. Second, we can choose to not produce something for aesthetics, as Californians seem to have done with offshore drilling. The aesthetic argument is, for me, much less compelling.

When California adopted the offshore ban on drilling they did so as a result of two arguments. They stopped drilling because some coastal residents did not like the looks of the oil derricks off our shores. At the same time we did it because some feared that the oil companies would be reckless in their pursuit of oil and would soil our beaches. Skelton says that with $4 oil we can no longer afford to make those kinds of choices. The alternative view is a bit less dependent on price and more on geopolitics.

The critics say it would take about a decade to get this capacity online - and that is probably true. But with $4 oil, the drive to explore would be pretty strong. The mere fact of our proposing to exploit an asset that we seem to have plenty of would have an immediate and beneficial effect on many of our geopolitical problem children. Think of what would happen to the tinhorns in the Middle East and Russia if the world price of oil dropped by say $50 a barrel as a result of new oil capacity being brought online.