Should Offshore Drilling Be Subsidized In The USA? (Essay Sample)

Should offshore drilling be subsidised by the U.S government?
Name
Professor
Institution
Economics
Date
Abstract
Offshore drilling started the mid 90s in the oil and petroleum industry in the U.S. Then, the U.S federal government was actively involved in the offering of incentives much but the price of this commodity was still perceived to be high. This paper will explore the impacts of U.S subsidising the act of offshore oil drilling, the risks involved in the process and the impact it has on the G.D.P of the nation. Furthermore, the paper will also provide an insight on what most of the economist fail to see feasible when the fact that even after the subsidising of the offshore drilling activity, the oil prices are still skyrocketing. Using a couple of statistical data, the paper will also cover extensively on the reasons as to why the graph of the oil prices has remained to raise despite the federal government offering incentives on this act of sourcing more fields of obtaining petroleum resources.
The paper will further dig on the risks associated with the whole idea of offshore drilling and provide an overall reason why despite the many risks involved the act remains feasible. A brief review of some recommendations that should be integrated to improve the activity will be, point out on the in-depth implication of the research methodology. Finally, this paper will dig out on the augment and what improvement that ought to be put in place to improve the whole idea of offshore drilling in future.
Table of contents
Introduction………………………………………………………………………………
Data analysis…………………………………………………………………………….
Research methodology……………………………………………………………………
Findings………………………………………………………………………………......
Conclusion………………………………………………………………………………...
Shortcomings…………………………………………………………………………….
References………………………………………………………………………………...
Introduction
Offshore drilling is an activity of boring the seabed in order to access the organically oil seams that were formed in the past era, for exploitation. In the U.S, the economy growth rate has embraced a rapid rate of industrial revolution from the verge of the pre-colonial times. This great advancement in the rapid industrial growth has risen the U.S to glory and seen it as the world’s leading over the past centuries. However, after the second world war there rose a huge dependence on imported oil resources on the side of the U.S government from the middle east countries (Arabic world). This was the beginning of all the oil related upheavals in the U.S. Despite industrial revolution having brought light in many areas, like raising living standards of the citizens by reducing unemployment cases and improving the health standards, it also brought negative implication on the economy by introducing energy crisis. Further research on this paper will examine the background of this energy crisis, energy reforms made by the U.S federal government and how this brought forth the idea of offshore drilling. My research will lay more emphasis on how the U.S energy reforms have impacted offshore drilling, whether the activity is still viable and provide an insight on why it should be subsidised further. The debate about the issue of the offshore drilling there is much political influence rather economic perspective.
Data Analysis
The U.S government, however robust the economic situation was, had still not enough oil resources to serve the rapidly growing demand.
Background of oil crisis in the U.S
Though U.S had maintained a neutrality policy all the way during the second world war, as some point the allied powers were forced to assist Israel to mark its boundaries from Britain. This was not taken at ease by the Arabic world and led to a war that was eventually won by the Jewish. U.S was not actively involved in this Arab-Israel war but President Richard Nixon of the United states of America made effort to replenish Israel. This act was not taken lightly by the Arabic nations, the major fuel suppliers of the U.S. This followed an embargo on the exportation of oil products to the United States by the Arabs, following reduced production. This had a major impact of a general worldwide energy crisis. The major mistake the U.S government made was to assume that the Arab would suffer a fiscal blow by the oil boycott. However, the latter responded to the reduced oil production by hiking the prices beyond the lowering production levels.
Data analysis
Oil prices in the USA began skyrocketing in the beginning of 1970s during the peak of Arabic Oil Production and Exporting member countries supply embargo. As a reform to solve the issue of energy crisis the United States and in its endeavour to gain fuel independence, the U.S President George W. Bush lifted the 1990 execute ban on oil drilling and this in 2003. This marked an extensive oil drilling activity, though some states like Florida and its cities barred this proposal of oil drilling on Florida waters.
The graphical sketch above illustrates the trend on the U.S dependence level on imported oil products from the 1950s to 2003. The rate of dependence on this economic resource has been greatly increasing over the past years. The slight decline between 1980 and 1990 is due to the energy reforms that were formulated during after the onset of the 1970s worldwide energy crisis. Otherwise, the graph shows an ongoing rising trend since even after the energy reforms were made, the rate of fuel consumption is still growing at a higher margin than it is being produced.
The ongoing offshore debate has risen a lot of heat on the implication of the activity to the country’s budgetary control and the overall effect on the Gross Domestic Product of the nation. Despite the enormous advancements in the mining technology, offshore drilling detractors are still opposed to the idea as an aid to gain fuel independence for the United States and reduce foreign oil dependence.
The illustration below shows the estimated effect of subsidising offshore drilling to the Gross Domestic Product of the U.S over the past decades.
An economic forecast by the Quest Offshore Resources president, Paul H. Hillegeist has shown the above projection on the GDP changes against oil changes. The forecast is based on the hypothetical research that he conducted regarding the effect of the increased offshore drilling in search for more oil resources to the expenditure of the imported oil resources. This economist has further proven that there will be relief on the tax burden and reduced unemployment in among the U.S economy by the implementation of this idea. CITATION Pau01 \l 1033 (Hillegeist, 2001)
With the subsidising of the OCS activities, there are projections of increased living standards in the whole range population since the impending risk of oil spills project is very minimal, about 0.0001%. However, critics still have it that despite the risk being so trivial, its impact will be so hazardous to the demographics within the vicinity.
Research Methodology
The data above provides a baseline to this research hypothesis. In my opinion, the U.S government should subsidise the OCS operations on the basis of reducing fuels costs. Assuming other factors such as the risks involved, there will be an achievement of the projections made by prior research. To strengthen the probability of achieving this, the debate on the ban of the offshore drilling should be concluded with a clear outline of how the activity should be performed rather than a total ban. For instance, President Obama had agreed to the bill on the expansion of the Off Continental Shelf oil mining but later halted the plans after the occurrence of the largest oil spill in the American history during his reign. Diverting from the political point of view to the economics perspective, subsidising offshore drilling will have a general rise in the living standards of the U.S citizen on this basis:
1 General increased oil supply to counter the existing demand
Oil influences the prices in almost all product market, putting in mind that all commodities including oil itself require shipment to the market. Again, the demand curve of oil in the market is so elastic. Increase an oil crisis occurs, there will thus be a general rise in the inflation curve of the U.S dollar against foreign currencies. A diverse network of the overall effect will degrade the conditions of living and render other products expensive in the market....