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Keep the Gulf Oil Rig Disaster in Context

Editorial

May 2010

by Mackubin T. Owens

The April 20 Deepwater Horizon oil platform explosion in the Gulf of Mexico was a catastrophe, not only taking the lives of 11 oil workers but also creating an environmental disaster that is likely to persist for a long time. Predictably, many coastal state governors and legislators have begun to argue that, in light of the disaster, President Obama should reverse his proposal earlier this year to significantly expand offshore drilling, including new areas along the Eastern Seaboard from Delaware to Florida, a section of the eastern Gulf of Mexico and parts of the Arctic coast of Alaska, and the president has announced that he will in fact put the plan on hold.

The concern of these lawmakers is understandable, but lest they overreact, they need to place their valid concerns within the broader context of the nation’s economic health and energy security. There are at least three points they must keep in mind.

First, despite the claims of some, alternative energy schemes based on subsidizing biofuels, wind, and solar are not, for the foreseeable future (if ever), going to replace oil and gas as the principal sources of power to sustain US economic growth. No one realistically expects that the demand for oil and gas, here or abroad, is going to decrease in the future. That oil and gas must come from somewhere.

Americans currently consume about 22 million barrels of oil daily, of which about two-thirds is imported. The Department of Energy’s Energy Information Administration (EIA) expects imports to reach 70% by 2025. This means we send billions of dollars abroad in payment for foreign oil. This makes little sense when, according to the U.S. Minerals Management Service (MMS), there are vast reserves of oil and gas beneath Federal lands and coastal waters. And it is likely that even these estimates are low. For instance, in 1987, MMS estimated that there were 9 billion barrels of oil in the Gulf of Mexico. By 2007, once drilling had begun in deeper waters, MMS had revised its estimate upward to 45 billion.

Second, the US oil industry is a major source of domestic employment. It already employs 1.8 million people and indirectly supports another 7.4 million. A presidential decision to reverse his expanded offshore proposal drilling would have adverse economic consequences. A study commissioned by the American Petroleum Institute (API) estimates that opening areas previously off-limits to drilling would generate some 160,000 new jobs over the next 20 years and raise $1.7 trillion in government revenue.

Finally, despite the Gulf of Mexico oil spill, the overall record of offshore drilling is exceptional. For instance, MMS observes that some 75 percent of the rigs in the Gulf of Mexico were hit in 2005 by two back-to-back Category 5 hurricanes, Katrina and Rita. However, no major spills resulted. According to the EIA, offshore drilling has maintained a remarkable 99.999 percent safety record since 1975, observing that only one-thousandth of 1 percent of the oil pumped since then has spilled, mostly in small quantities that were easy to clean up.

This record is far superior to that of mammoth oil tankers, on which we increasingly have to rely because of limitations on domestic drilling. The Deepwater Horizon spill is on course to match or exceed the Exxon Valdez spill in 1989, but as Steve Hayward observes in The Weekly Standard, that event was only the 35th largest tanker-related spill over the last 40 years. Since the 1989 disaster, there have been seven larger tanker spills, including one off the Angolan coast in 1991 that spilled seven times as much oil as the Exxon Valdez. However, this event received hardly any media coverage in the United States.

The Deepwater Horizon explosion illustrates the risks associated with the production of energy. But all decisions must take into account cost, benefits, and risks. Let us hope that lawmakers take all of these factors into account rather than repeating the over-the-top reaction to the Santa Barbara spill 40 years ago. In light of the economic realities of energy production, cool heads need to prevail.

Mackubin T. Owens is a professor of national security affairs at the Naval War College in Newport, RI and editor of Orbis, the quarterly journal of the Foreign Policy Research Institute (FPRI) in Philadelphia.