Last night the Senate passed a $700 billion rescue for the credit crunch that is beginning to hurt small businesses. The House is set to vote tomorrow on the package and the new FDIC fixes, which will likely win enough votes for final passage. But the plan is hardly a silver bullet fix for the U.S. economy. Although there are many regulatory and tax fixes that should be tackled to reform our financial sector, other sectors of our economy are also in desperate need of a regulatory overhaul. Considering her deep background on the issue, hopefully in tonight’s vice presidential debate Sarah Palin will make a strong economic case for developing our natural resources.
At a time of soaring budget deficits, the most obvious benefit of choosing to develop our natural resources is the substantial and positive effect it would have on taxpayers’ bottom line. According to Energy Information Administration (EIA) estimates, 18.7 billion barrels currently are off limits in the Outer Continental Shelf and another 10.3 billion barrels in ANWR. A 2007 study by the University of California estimated leases and royalties from ANWR would generate $251 billion in government and state revenue — and that was assuming a barrel of oil cost $53. Oil opened at $98 a barrel today. A rough back-of-the-envelope calculation shows the royalty and lease payments from oil companies that are allowed to develop our ANWR and Outer Continental Shelf resources could net taxpayers almost a trillion dollars. And that doesn’t include revenues from the 77 trillion cubic feet of natural gas in the Outer Continental Shelf.
On top of the benefits to our nation’s fiscal health, developing natural resources would also be a boon to the economy in two other ways: First, it would reduce the amount we spend on imported oil. Second, it would lower the price of petroleum. The two would work together to reduce energy expenditures and the trade deficit while expanding economic activity. According to Heritage senior policy analyst David Kreutzer:
Increasing domestic production by 1 million barrels per day would reduce imported petroleum costs by $123 billion, generate an additional $7.7 billion in economic activity, and cost $25.6 billion in additional oil production costs. The net gain to the economy would be $105 billion. The impact on employment would be an increase of 128,000 jobs.
Applying the same analysis to a 2 million-barrel-per-day increase in domestic petroleum production yields net economic gains to the economy of 270,000 jobs and $164 billion.
As gas prices soared over the summer and the public became educated on the issue, conservatives scored a major victory when officials dropped the federal ban on resource production in the Outer Continental Shelf. But much more work needs to be done.
Thirty years of terrible environmental policy still stands between American consumers and their own natural resources. The laws that allow fringe environmental groups to hold up development of natural resources need to be repealed or rewritten so the market can work as quickly as possible. The Alaska Oil Pipeline took two years, two months and four days from the first shovel of dirt until completion. This engineering marvel covers 800 miles, crosses three mountain ranges and traverses 800 rivers and streams. That feat simply could not be replicated in today’s legal environment. American engineers can deliver energy to market quickly. We just need the political will to get the environmental left out of the way.
Quick Hits:
- The credit squeeze worsened yesterday as the rate banks charge each other hit a record 5.07%.
- The new top U.S. commander in Afghanistan said yesterday that more American troops are urgently required to combat a worsening insurgency, but he stated emphatically that no Iraq-style “surge” of forces would end the conflict there.
- Last night Congress gave final approval to a breakthrough agreement permitting civilian nuclear trade with India for the first time in three decades.
- Computer security researchers discovered a huge surveillance system in China that monitors and archives Internet text conversations that include politically charged words.
- According to Gallup, 57% of Americans want Congress to start from scratch in devising a plan to deal with the Wall Street financial crisis.