Offshore Drilling May Have Little Effect on Oil Prices

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President Bush is pushing offshore drilling as a way to increase production and cut oil prices. Robert Siegel talks to Henry Lee, director of the Environment and Natural Resources Program at Harvard University, who says offshore drilling may not have an immediate impact.

ROBERT SIEGEL, host:

One measure of national anxiety over the price of oil is how many people now favor offshore drilling. A Gallup poll found 57 percent in favor. Senator John McCain and Florida Governor Charlie Crist have changed their position and now no longer support a moratorium on offshore drilling.

On the other hand, environmentalists and many others are against it, including many who depend on coastal tourism.

The arguments between the two camps come down to claims that few of us are in a position to verify. How much oil is out there? How long would it take to find it and start pumping it? And what impact might that have on the price of oil?

Those are questions that we're going to put now to Henry Lee of the Kennedy School of Government at Harvard, where he's director of the Environment and Natural Resources Program. Welcome to the program.

Mr. HENRY LEE (Director, Environment and Natural Resources Program, Harvard University): Thank you.

SIEGEL: I wish to state at the outset that you appear neither as an advocate nor an opponent of offshore drilling.

Mr. LEE: That's correct.

SIEGEL: First question: How much oil is offshore?

Mr. LEE: We don't know. Until you actually go out and explore, you won't know. All we know is that there are certain geological formations that could contain oil.

SIEGEL: If an oil company started work today, if it had permission, it went out, it started looking for the oil, how long would it be before it could be pumping it?

Mr. LEE: Well, you'd have to go through the permit process. You have to go through the bidding process. You have to go through the planning process, and then you start the actual construction and development process. And that can take anywhere from about eight years to 14 years, depending on the complexity of the formation that you're dealing with and how far offshore it is.

SIEGEL: Given what the oil companies think is out there, how does it compare with our needs and with the world's energy needs?

Mr. LEE: Well, first of all, you can have oil or natural gas. In terms of the total world needs, if you take the figures that the White House is releasing, you're looking at a maximum average annual production somewhere in the vicinity of a million barrels, so you're looking at an addition of a little bit less than one percent to the world's daily production of oil.

That will have some downward pressure in a tight market, if we have a tight market 10 years out, but it's not going to have a dramatic change.

SIEGEL: What do you make of the analyses of some - I'm thinking of the industry watcher Daniel Yergin, for example - that the announcement of offshore drilling alone would have an impact on oil futures? People would sense that some number of barrels would be coming on-stream in a few years, and right there that would alter some market behavior.

Mr. LEE: I don't know why it would when you're using the time frame that you and I have been using of eight to 14 years.

SIEGEL: Eight to 14 years, yeah.

Mr. LEE: Because most of your futures markets range between a few months into the future to a couple of years into the future. If you go beyond three years, that market is very thin, and most of the people who are playing in the futures market are not playing in the 10-year futures market. They're playing in the six-month futures market.

SIEGEL: You measured the president's estimate of offshore production as a percent less than one percent of world demand. What about Americans who say how about American demands? Is there a discrete, national domestic economy of petroleum here?

Mr. LEE: No. There is a single world oil market. There is not a U.S. market and a European market and an Asian market. There is a world market, and oil is totally fungible. And what you want to do is affect the world market, because you can't isolate the United States. We have been talking about energy independence since the early 1970s, and I think one of the ironies of this is that every person running for the presidency has claimed that they were going to make America more independent if they were elected, and every one of them has left with America more dependent than when they got in.

SIEGEL: So when people say but it could increase U.S. oil production by seven percent or something like that, that's good news for Americans in the oil-production business, but it doesn't affect the price of oil for consumers here.

Mr. LEE: No, it doesn't have a - it is the impact on the world oil market that will affect the price, not the impact on the U.S. market, except as you point out, for the people who are actually producing that oil.

SIEGEL: Well Henry Lee, thank you very much for talking with us today.

Mr. LEE: Well, thank you very much for having me.

SIEGEL: That's Henry Lee, who is director of the Environment and Natural Resources Program at the Kennedy School of Government at Harvard University.

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Adviser Defends McCain's Shift on Offshore Drilling

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When John McCain this week called for an end to the federal ban on offshore drilling, the Arizona senator wasn't flip-flopping, says senior campaign adviser Charlie Black: He was acknowledging the "great crisis in energy" facing the country.

"It's an economic crisis for the average American, who are paying triple what they paid for gasoline only a couple of years ago," Black tells NPR's Robert Siegel.

But just a month ago, when McCain was asked about offshore drilling during a campaign stop in Wisconsin, the presumptive Republican nominee noted that such resources would take years to develop, and that the U.S. should instead focus on alternative energy sources. Black says McCain's new stance represents weeks of talks with policy advisers on how to bring energy security and energy independence to the U.S.

"So it's not a change in his position as much as a new challenge to America," Black says. He adds that McCain "has always said that offshore drilling should be up to the states" and not the federal government.

McCain on the Economy

In a recent op-ed piece in The Wall Street Journal, Karl Rove argued that both McCain and his Democratic rival, Illinois Sen. Barack Obama, have displayed a "disturbing animus" toward free markets. Black rejects Rove's argument, saying that McCain is a populist who believes in free markets, limited government and the free enterprise system to produce jobs and prosperity.

"He does believe — as Teddy Roosevelt did — that you do need government there for some oversight and some regulation to avoid excess," Black said.

Barring Lobbyists from the Campaign

Have lobbyists been vilified in this campaign? No doubt about it, Black says.

Black himself is a recently retired lobbyist, who says he now volunteers for the McCain campaign. In mid-May, the McCain camp barred registered lobbyists from its staff and volunteer lists after at least five Washington lobbyists left his campaign. It was an embarrassment for a politician who often has prided himself on scorning the insider nature of Washington.

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