Saturday, November 13, 2010

Unintended Consequences of Oil Drilling Regulations

Here is a link to a great article from Shawn Regan at the Property and Environment Research Center on how government regulations are effecting oil exploration. Rather than protecting the environment, it turns out that heavy handed regulations--driven by NIMBYs--are leading us to look for oil in all the wrong places.

The world isn't running out of oil, yet governments have essentially forced oil companies into offshore drilling. The US government has designated 80% of oil rich offshore land, and 60% of equivalent on shore land of limits to drilling. Combine this with a liability cap for oil spills, and offshore drilling all of a sudden makes plenty of sense for drillers. Michael Greenstone of the Brookings Institute summed up the situation pefectly: “The cap effectively subsidizes drilling and substandard safety investments in the very locations where the damages from spills would be greatest.”