July 14, 2008 / 6:28 PM / 11 years ago

FACTBOX-Five questions about US offshore oil drilling

July 14 (Reuters) - President George W. Bush on Monday lifted an executive ban on offshore drilling in a move to urge Congress to remove a similar moratorium to boost domestic supply amid record crude oil and gasoline prices. Here are five questions about offshore oil drilling:

— What are the politics of the issue? How much of this is electioneering meant to woo voters upset by the price of gas and crude oil?

Republicans and Democrats in the U.S. Congress have identified soaring energy costs as a key issue in the upcoming November elections. Both parties seek to blame each other for record-high gasoline prices averaging more than $4 a gallon nationwide for the first time ever. Republicans have promoted supply-side solutions like drilling offshore and in an Alaska wildlife refuge, while Democrats are mostly pushing demand-side ideas such as renewable energy sources. The Democrats argue that oil companies need to work on maximizing production on their current leases, including rights to 68 million acres in the lower 48 states yet to be drilled, before asking for protected lands.

Bush suggested in a radio address that some Democrats may be having a "change of heart" in response to growing concerns from constituents and might "rethink their long-held opposition to opening up more areas for domestic production." But bills introduced by Republicans in the House and Senate to lift the drilling ban will still face an uphill battle as 60 votes are required in the Senate to overcome a filibuster on the legislation. Republicans may opt to include language to end the drilling ban in a budget bill, which would only need a simple majority to pass.

— Will the election become a referendum on the issue?

Rising oil and gasoline prices have put energy concerns at the center of the contest between Republican presidential contender John McCain and presumptive Democratic nominee Barack Obama. McCain has embraced offshore drilling and proposed a plan to build 45 new nuclear power plants by 2030. Obama has criticized McCain’s drilling stance, and instead has advocated a plan to slap new taxes on oil company profits.

— What kind of oil supplies are we talking about?

Bush said opening federal lands off the U.S. coast could yield about 18 billion barrels of oil. That would meet current U.S. consumption for about 2-1/2 years. The U.S. Department of Interior notes that these figures are based on data more than 25 years old because Congress repeatedly blocked attempts to conduct new surveys on the size of the resource in the banned drilling areas. With better technology available today, DOI believes even more than 18 billion barrels of oil could be detected. But DOI warns that offshore drilling would not help lower gas prices for consumers now. It would likely take five to 10 years before oil from banned exploration areas made it into the market. The prospect of more energy supply down the road could calm nervous traders who see a looming global oil crunch, but any actual supply would be years away even if Congress acted quickly.

— What is the real threat to the environment?

Environmental groups warn that offshore drilling opens the door to oil spills and litter that could mar pristine beaches in Florida and California. But oil companies claim they have improved their drilling technology to the point that the risk of offshore oil spills is nearly nil. A joint study by NASA and the Smithsonian Institution found that more oil seeps into the ocean naturally than from drilling accidents. According to the study, natural underwater oil deposits leak some 62 million gallons of oil a year into the ocean compared with 15 million gallons from offshore drilling. Offshore drilling is actually the smallest source of oil pollution in the oceans, while runoff — from activities like car owners changing their own oil — is the largest at 363 million gallons per year.

— Which companies stand to benefit?

U.S. oil companies such as Exxon Mobil (XOM.N), Chevron Corp (CVX.N) and ConocoPhillips (COP.N) have consistently pressed for more access to U.S. drilling acreage. International oil companies are facing dwindling prospects abroad as countries such as Venezuela and Russia tighten access to prime drilling property and demand a higher take of the profits. (Reporting by Chris Baltimore and Jasmin Melvin)



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