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Oil Heads For $100 A Barrel, As Industry Pushes For More Drilling Offshore

The price of oil has hit its highest level in over two years -- $95 a barrel for Brent crude. Rising prices are part of the ongoing recovery in the world economy, but energy economists are saying there's a danger they could hold back growth. And just in time for the new Congress, and promises of easy regulation on business for the next few years, a big U.S. industry group has started a push to increase drilling off the U.S. coasts.

The stars and planets are starting to line up just right for the U.S. oil industry. The new Congress, through Representative Darrell Issa, a Republican from California who will head the House Oversight and Government Reform Committee, has announced its intentions to be very easy on business interests, and has invited them and their lobbyists to submit wish lists of regulations they would like to see overruled.

The timing could not be better, because oil prices are looking like they will be at $100 a barrel before long. The chief economist at the International Energy Agency, Fatih Birol, says the $70 to $80 price range is much better for fostering growth, and told the Financial Times that

The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil-consuming countries and to the oil producers.
He added that OPEC members should start producing more, and oil consuming countries need to accelerate their efforts to reduce their reliance on oil, especially for transportation.

The American Petroleum Institute (API), to put the issue in their perspective, has emitted a flurry of literature explaining how opening up drilling offshore, would create lots of jobs. (Not lots, actually, just a few hundred thousand.) There's a speech from the API president, Jack Gerard; a report from consultants Wood Mackenzie; and several versions of an API white paper, all making the case for increased oil drilling off the coasts of the U.S. They've even put up posters in the Washington D.C. Metro in the stations closest to Capitol Hill.

Here's the message from the API white paper --

We essentially have two choices:

Choice #1

Encourage more domestic oil and natural gas production to help meet future demand, putting more Americans to work and delivering substantial government revenue to benefit all Americans; or

Choice #2

Accept policies that discourage development at home, forcing us to import more energy. That means spending more overseas for oil and natural gas, weakening U.S. energy security, reducing U.S. jobs and diminishing U.S. economic growth.

The white paper does mention that the industry is trying to reduce its environmental footprint, and that oil companies have invested $194 billion in environmental stuff since 1990 ($9 billion a year -- not much, in my opinion, for one of the world's biggest industries). But what they really want is to be able to drill offshore the Atlantic and Pacific coasts.

Yes, we are locked into oil for the present, and yes, we are making progress, slowly, to move to other energy sources. But in view of the painful and costly lesson of the enormous BP offshore drilling disaster last year -- don't even get me started on hydraulic fracturing for natural gas -- let's hope Congress thinks of the long term health of the entire U.S. economy and environment, not just large oil interests, and uses some common sense in its legislation in the next two years.