April 30, 2011
It is difficult to understand why newspaper editors think that their typical readers have more time to evaluate the truth of politicians’ claims that reporters who have a full time job to do such things. However these seems to be a widely held view, since so often articles are devoted to telling us what the politicians claim without including any effort to uncover what is true.
Today’s he said/she said in the Post and the NYT is about high gas prices. The Democrats are looking to take back tax breaks from the oil industry while the Republicans are pushing to “drill here, drill now.” It would have been useful to include a bit of analysis so that readers could judge the likely impacts of the two policies.
In the case of taking back tax breaks, there could be some modest deficit reduction to help the budget. The $4 billion annual figure cited by the Democrats would be a bit more than 0.1 percent of total spending. There could be some marginal impact on oil exploration and therefore future output, but given the likelihood that prices will remain high in the future, the plausible impact on supply and price in future years would most likely be too small to be measurable.
The plans to drill here, drill now would have zero impact on prices for some time, since most of the areas that have been put off limits to drilling by environmental regulation are difficult to explore and/or reach, like the Arctic Wildlife refuge or deep sea drilling in protected areas of the Gulf of Mexico. It would several years before any noticeable about of oil could be produced from these areas.
Furthermore, there is a world price of oil, not a domestic U.S. price. This means that increased drilling in the United States has roughly the same impact on U.S. prices as increased drilling in Kazakhstan or Iran. Plausible estimates of the amount of oil potentially produced from protected areas would be unlikely to lower the world price of oil by more than 10 percent and most likely less than 5 percent. (Drilling is unlikely to increase world supply by more than 2 million barrels a day, roughly 2 percent of world production.)
Even in this case, the increased supply would only be available for approximately 10 years. After that point, production levels would dwindle as would the impact on prices.
It would have been useful if these articles included some information on the likely impact of the policies being proposed, since most readers do not have more time than the Post and NYT reporters to examine these issues.
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