Offshore Oil Exploration: Environmental vs. Economic Debate

Introduction

Offshore drilling refers to the "extracting of oil from fields that lie beneath the ocean floor, anywhere from a few hundred feet to 200 miles off the coast" (Connors, 2009). The first offshore well was drilled in 1887 off the coast of California, and at present there are approximately four thousand offshore platforms in U.S. Federal waters (Connors, 2009).

The issue of offshore oil exploration carries a number of problematic consequences. In the first instance, the question arises as to whether it is cost effective and worthwhile to expend large amounts of money to establish offshore oil sources. Another issue — and the one that will form the fulcrum of this paper — is that access to offshore oil exploration has various environmental consequences that must be taken into consideration, especially in this age of climate change and global warming. For example, the oil spill from the Exxon Valdez tanker caused extensive damage to ecosystems and alerted environmental authorities to the danger that the oil industry could pose to the environment and, by extension, to the economies of the countries affected.

The central thesis explored in this paper is that offshore oil exploration is problematic in terms of two central concerns. The first is that oil poses a significant threat to the international community and the United States in terms of environmental damage, a concern compounded by the reality of globalization. The second is the question of the cost effectiveness and practicality of offshore oil exploration.

This issue is also framed by two opposing perspectives. One perspective views offshore oil exploration as essential to the continued smooth functioning of the economy, asserting that any adverse effects are outweighed by the necessity and long-term positive consequences of exploration. From the opposing point of view, the environmental costs of offshore drilling are excessive, and such exploration would have a serious — even critical — impact on the environment, creating a range of problems that will affect the world negatively. This perspective also questions the actual cost effectiveness of offshore drilling.

These competing views pose significant challenges that the governments of developed and developing countries must face: the environmental threat that offshore drilling presents, and the problem of diminishing oil resources. The thesis examined in this paper is that the environmental factors outweigh the possible gains from offshore exploration.

The issue of oil and oil exploration must be understood against the background of the international petroleum market and the contemporary importance of oil as an energy source. In essence, oil drives the economies of the world and is essential for almost every industry and economic activity. This refers not only to fuel for transport in modern economies, but also to the myriad ways in which oil usage and consumption impact particular countries and economies. When one takes into account the contemporary reality of globalization, the impact of oil becomes even more evident.

The Context of the Debate

Put simply, globalization describes the modern, technology-driven, communications-dependent world in which every economy in every region is affected by the global economic situation — a situation intimately connected to oil. The effect of an increase in the oil price is therefore widespread and affects every country in relation to its dependence on oil. This reality is central to understanding how the oil industry impacts the global economy.

This reality also underpins the positive argument for offshore oil exploration: given the necessity of oil for commerce and industry, and taking into account the decline in availability and access to this resource, offshore exploration is essential for the continuance and stability of the global economy. Proponents of this view further emphasize that a stable global economy is important for social stability as well.

The economic importance of oil is underscored by numerous studies and statistics. World oil production averaged approximately 83.02 million barrels per day in 2004, compared to about 74 million barrels per day in 2002 (Some interesting oil industry statistics, 2009). More critically, "consumption is increasing at a faster rate than the increase in production. And at the end of 2005, world demand exceeded world refinery capacity for the first time — demand of 84 million barrels per day vs. 83.5 million barrels per day refinery capacity" (Some interesting oil industry statistics, 2009). This has a number of international economic implications and tends to bolster the case for offshore oil exploration.

The result has been an ongoing search for new oil resources and reserves. The Alaskan oil fields and the oil fields in the North Sea, for example, have emerged as new and contentious possible sources. This underscores the need for oil exploration and the possibility that offshore oil can augment supplies and help remedy the energy dilemma facing the world economy today.

Baird (2008) summarizes the background to policy changes and shifts in public opinion regarding offshore oil exploration in relation to the contemporary economic climate:

"Skyrocketing fuel prices, unprecedented home foreclosures, rising unemployment, escalating food prices, increasing climate disasters, and the continued war on two fronts have prompted greater public support for renewed offshore drilling for oil. A Gallup poll conducted in May of 2008 found that 57% of respondents favored such drilling, while 41% were opposed…" (Baird, 2008, p. 13).

Perspectives on Access to Offshore Oil

Recent economic factors and the downturn in the economy have promoted a mood shift away from the previous disinclination toward offshore oil exploration, leading to pressure from certain quarters to allow greater access to offshore oil in order to reduce dependence on foreign resources. This change in mood is reflected in governmental policy as well. As Baird states:

"The political landscape is also being changed in favor of offshore drilling, with the results of a Zogby poll showing that three in four likely voters — 74% — support offshore drilling for oil in U.S. coastal waters, and more than half (59%) also favor drilling for oil in the Alaska National Wildlife Refuge." (Baird, 2008, p. 13)

One can also point to the executive order issued by President George W. Bush in 2008, which lifted a 1990 executive order by President George H. W. Bush banning offshore drilling (Baird, 2008, p. 13).

However, there is another view of the proposed increased access to offshore exploration — that of environmentalists. This dichotomy of opinion has fueled a heated debate. The environmentalist viewpoint is under increasing attack in today's economic climate: "The energy stalemate between environmentalists and industry that has inhibited U.S. offshore oil production since the late 1960s is being broken; environmental arguments no longer add up, and working Americans are now taking energy policy inaction personally" (Baird, 2008, p. 13).

This has created a divisive situation in which economic concerns are viewed by some as more important than the environmental implications of offshore exploration, while a growing and vocal environmental lobby continues to oppose it. "The debate on offshore drilling has captured headlines in newspapers, stirred debate on talk radio, and has been at the forefront of the nightly news" (Baird, 2008, p. 13).

One significant question that has affected policy and created confusion is how much oil could actually be retrieved from offshore exploration, when measured against the costs and time involved to extract and transport it. It is clear from many sources that offshore oil cannot, on its own, eliminate the United States' dependence on overseas oil supplies — a factor that has led many to question the value of offshore exploration, especially given its potential environmental consequences.

Environmental concerns represent the greatest challenge to governments regarding offshore oil drilling. The case for offshore oil drilling received a significant setback in 1969 when Union Oil began exploring for oil off the coast of Santa Barbara, California. The boring breached a high-pressure oil pocket, causing an explosion at the site and leading to oil "congealing into a chocolate mousse mat a foot thick" (Rothbach, 2007, p. 283). This disaster led to the National Environmental Policy Act of 1969 (NEPA), which acknowledged a lack of knowledge about ocean ecosystems. At its core, NEPA requires federal agencies to produce an environmental impact statement (EIS) whenever they propose a major federal action, though "it was unclear from the original language of the statute whether the lease of oil exploration rights was covered" (Rothbach, 2007, p. 283). In 1978, Congress amended the Act to specifically state that if a plan for the development and exploration of offshore oil resources constitutes a major federal action, then an EIS must be produced (Rothbach, 2007, p. 283). These events contributed to the growing concern about the environmental impact of offshore oil exploration.

Conclusion

The debate about increased access to offshore oil exploration continues in both a political and policy sense as well as in relation to environmental concerns. There is little doubt that offshore oil exploration can have negative consequences for marine life and coastal regions. However, the full extent of these consequences is not yet known with certainty. Nevertheless, there are sufficient studies and reports that provide evidence of the destructive environmental consequences of oil exploration.