The concept of offshore drilling as a way to reduce the price of gas is gaining traction. The reasoning is that the price of gas is determined by the price of oil and the price of oil is determined by supply and demand. I wrote on this subject previously and made three main points:
1. The worldwide demand for oil will continue to outpace supply because of explosive growth in China and India. $5+ a gallon gas is likely to come in the next few years regardless of what we do.
2. The price of oil is determined by world markets. Additional oil from new wells on US coastlines would be added, like drops in a bucket, to oil from wells in Saudi Arabia, Iran, Venzuela, Russia and elsewhere. There is simply not enough oil in USA coastal waters to make a meaningful difference in world markets.
3. It would take 5-10 years before delivery of oil from new offshore wells begins.
However, if we mandated that oil from re-opened coastal areas could be sold only in domestic US markets we just might see a meaningful drop in gas prices. Instead of adding drops to a bucket we'd be adding drops to a glass... and the glass might overflow. If that happened gas prices would fall... or at least rise less quickly. I'm not advocating offshore oil drilling. I believe that money and effort would be much better spent on developing alternative souces of energy as proposed by T Boone Pickens.
All I'm saying here is that IF we want to benefit from drilling new offshore wells THEN we should require that the oil from those wells be delivered exclusively to US oil refineries. In this manner we'd essentially cause US oil companies to sell oil domestically for less than they would get than if they sold it internationally. Even if oil companies were constrained in this manner they would make very healthy profits and have plenty of incentive to proceed.
