The Costs of Drilling for Oil
As attention has drifted from the oil spill in the Gulf of Mexico the Obama administration has lifted the ban on deep-water drilling. Many oil companies are looking to expand their extraction efforts into drilling in the Arctic Ocean. A recent report by the Pew Environmental Group has been released in an attempt to prevent such drilling. The report notes that the risks of drilling in the Arctic are far greater than those in the Gulf of Mexico, especially the greater difficulty in responding should a spill occur and the more delicate nature of the ecosytem. This report and similar concerns could likely lead to a great deal of additional regulation for Arctic drilling. These facts bring to mind the negative externalities of such a new spill. The expense of cleaning up a spill in the Arctic could be far greater than was seen in the Gulf due to transportation difficulties alone. Oil companies are well aware of the negative PR consequences as well and are actively engaged in advertising campaigns and new research and stricter guidelines to reassure the public and decrease the risk. Despite that additional regulation could very likely be enacted as a safeguard. All of this translates into increased oil costs. An even more worrying fact that is being over looked is the steadily increasing replacement cost for new oil as easily accessible reserves are exhausted. As of yet the cost of these negative externalities haven't translated into higher gasoline prices but in time the consumers will be forced to bear these costs.