Oil producers are now allowed to lease previously protected parts of the Outer Continental Shelf (OCS), thanks to the repeal by Congress of its 26-year-old ban on offshore drilling. Most Americans believe that increased domestic drilling will reduce gas prices and enhance U.S. energy security. Skeptics cite government statistics showing that more domestic drilling will have only a miniscule effect on gas prices and argue that a larger domestic oil supply will not solve America’s long-term energy problem.

In the near future, an increase in offshore drilling will not have a significant effect on gas prices. There are two main reasons for this. First, offshore drilling is not like onshore drilling. Oil companies will shy away from areas where there is no preexisting infrastructure, such as the Atlantic coast. Second, the deepwater areas now open for drilling are located more than 50 miles off the coast, where infrastructure is relatively expensive and resources scarce. Robert Hahn of the American Enterprise Institute and Peter Passell of the Milken Institute have estimated that allowing “full-speed ahead” drilling in all previously protected parts of the OCS and in one section of the Arctic National Wildlife Refuge (ANWR) would lower gas prices by about 1 percent. Since ANWR remains off limits, even a 1 percent decrease seems unlikely.

The good news is that American consumers can look forward to a bigger price impact in the more distant future. As the necessary infrastructure slowly accumulates, and as oil producers learn more about production and face less risk, the number of barrels produced from offshore drilling should increase, thereby lowering domestic gas prices.

What about energy security? Hahn and Passell reckon that for every barrel of oil that comes from the newly accessible OCS, oil imports will decrease by 0.6 barrels. Economists still disagree about whether or how much America’s reliance on foreign oil affects U.S. GDP volatility, but it’s generally agreed that oil imports have hidden costs related to national security and market conditions. These costs are borne by taxpayers, and they may run as high as $17 per barrel, according to Oak Ridge National Laboratory scientist Paul Leiby.

In the short term, an expansion of offshore drilling will help boost government oil revenues, which may translate into lower taxes or more funding for renewable energy research. Hahn and Passell predict that the benefits to oil producers and taxpayers will exceed a trillion dollars. One long-term benefit of expanded offshore drilling is that scientists and government officials will have access to more information about our available natural resources. Geologists have not explored the newly opened parts of the OCS for decades, and government estimates of U.S. resources are outdated. Increasing the available information will aid national policymakers and lead to better decisions in both peacetime and wartime.

Poh Lin Tan is a research assistant at the American Enterprise Institute.

Image by The Bergman Group/Darren Wamboldt.