What are the costs of off-shore drilling? Monetary, and otherwise. What are the benefits?



  1. 0 Votes

    The costs of off shore drilling are very high. You have to explore the region and map the underlieing rock – you have to setup a rig, and drill deep through many layers of rock. Then you have to pump up the oil. Drilling a single hole can cost millions; imagine if you are the geologist who says drill here, and then no oil is found – you have lost your company at least tens of millions of dollars. Because of the thorough study and lengthy legal measures involved in drilling offshore, drilling sites can take years to come online. Local governments that derive money from tourism, take Florida for example, worry about oil leaks/spills. For example in the Gulf of Mexico an oil rig just went down in flames today leaving a crude oil patch of 1 mile by 5 miles…

    The benefits of selling oil are concentrated on the seller’s side of the the equation. As oil is sold on the free market, oil that drilled off US shores can as easily end up in gas tanks in China or India as in US cars. This is why off shore drilling will not only reduce oil prices by the amount it succeeds in reducing world oil prices (in other words it won’t decrease prices like republicans would like you to think it would). Meanwhile the profits of the oil sold are split between the people who work for the company and the people who own the company (shareholders). 

    • 0 Votes

      I agree with everything you said but would like to comment on where the money from the oil drilled goes. I know right now it goes to the shareholders and the workers but do you know of anywhere that gives some money to the people of the region the oil comes from. This would go a long way to improving the lives of the poor people that live where most of the oil is drilled especially in South America. Imagine if a portion of the money received from the oil would go to improving health care or schooling. It could be pretty powerful.

    • 0 Votes

      For a company to drill in a particular region they have to move through all the legal requirements of that region. That can mean paying permit fees or taxes. Those are usually channeled through government, and may pay indirectly for programs such as you mention above.

      However, the oil companies are not in the business of charity. They are interested in making as much many as they legally can. Towards this end they have very good lawyers who work with the local laws to their financial advantage.

      A private oil company rarely is able to set up shop in any country without some sort of payment to the government. Some countries such a Venezuela and Brazil have taken on the challenge of developing their own national oil companies in order to control the revenue, and to fund government programs. Before last year’s raucous Iranian elections people doubted that the incumbent president would be reelected because the falling price of oil during the financial meltdown had cut funding for many government programs.

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