America Needs To Drill For Arctic Oil And Obama Is Stalling

The growth in American oil production has been nothing short of spectacular over the last few years.

I’m certainly not the first person to talk about the economic benefits of fracking and offshore drilling. For example, parts of North Dakota were booming so fast over the summer that a Wal-Mart was paying over $17/hour for your typical “minimum wage” job because they needed to attract workers. More to the actual fossil fuel markets, US oil production has increased by near a billion barrels per year from 2008 to 2013. This isn’t even taking into account the dramatic rise of US production of other petroleum derivatives such as propane and natural gas, which have also skyrocketed during the “fracking boom.” From drilling permits, to tax revenue collected, to increased job creation (and thus, even more tax revenue), our domestic oil boom has been a true economic lift in the current Obama economic malaise.

One of the benefits that all American families have received from the dramatic increase in oil production is the recent decrease in the price of gasoline and other fossil fuels. While still elevated (as compared to early 2009), gasoline has dropped from an average of around $3.70 per gallon to under $3.00 per gallon today (as of mid-November 2014). While we can’t wholly attribute oil’s decline to the increase in US oil production, it certainly has helped the price decline. In fact, despite geo-political instability (e.g., ISIL) in the Middle East, oil prices have declined. If that’s not an argument to ramp up United States’ oil production, I don’t know what is.

Knowing all of the benefits of American oil production: why is America behind in the Arctic oil exploration?

Unfortunately, this is a pattern under the Obama Administration. Just like offshore drilling moratorium on federal lands, this Administration is dragging its heels on Arctic oil exploration. This gives an opening to Russia to move first in the Arctic and lay a claim on any oil it finds there.

1. The Best Sanctions Would Be To Win The Race to Develop Arctic Oil Reserves

It’s ironic that the Administration–which is so hell-bent on imposing sanctions on Russia–would not move to lay claim to oil discovery in the Arctic. Putin appears to be moving quickly to get around any sanctions as America and Europe dilly-dallies around with potential sanctions. The best “sanctions” would be for America–and American companies–to develop Arctic oil reserves for America.

America’s domestic oil boom is paying dividends already, and will continue to do so in the future. Exploration abroad in the Arctic not only will add to America’s oil “portfolio” of diverse sources of oil (fracking, traditional, offshore, etc.), but it will also serve as a signal to Putin that Americans will defend and explore economic zones for the benefit of Americans.

2. The Trans-Alaska Pipeline Could Use Some Help.

Moreover, while Congress (and the President) spar over pipelines such as KeystoneXL, the Trans-Alaska Pipeline System is at risk of not being able to transport enough oil for it to continue to be utilized. This is not a “peak oil” scenario, but more like the drying up of “easy to reach” oil wells. This could cause problems for people on the West Coast who rely on Trans-Alaska Pipeline System (“TAPS”) for oil. Developing oil reserves in the Arctic, which could be then transported down from Alaska, could certainly revitalize the TAPS.

3. American Companies Are Infinitely Better Than Russian Companies With Respect To The Environment.

Although I consider myself a “conservationist” (as opposed to an “environmentalist”), I understand that the knee-jerk reaction by progressive environmentalists is that oil exploration is bad for the environment and runs the risk of damaging the environment. Do you honestly think that Putin cares about that? At least American companies are better corporate citizens and would certainly be better actors and stewards of the environment than Russian companies. Cronyism might exist in America, but nowhere near the extent that it does in Russia, of course.

4. Such Exploration Hopefully Will Lead To Natural Gas Exports.

America sits on a glut of natural gas. We currently pay $4.31/MMbtu for natural gas, while Europe pays more than double and Japan pays more than quadruple that price. Many folks such as Scott Lincicome at Cato have advocated for exports of natural gas for this reason. Exploration in the Alaskan Arctic region could be the start of reforms leading to natural gas exports to Japan to take advantage of the giant price differences.

Bottom line: Congress needs to act fast and drill, baby, drill in the Arctic–otherwise Putin will take advantage of America’s bureaucratic delays. It’s in America’s strategic interest to develop as many different energy resources as possible. Permitting companies to explore the economics of Arctic drilling would be beneficial to our economy, to our businesses, and to the American consumer. It’s a no-brainer.

As always, free markets are better markets.