Note: new title replacing "Drill that oil" inspired by Oakland Raiders owner Al Davis who famously told his coach (I think) "Just win, baby."
The LATimes reports that in response to high energy prices the Bush Administration's goal of increasing energy supply, recently implemented inefficiently (i.e., subsidy city) by this summer's Energy Bill, is being pursued further (Plan for Coastal Drilling Emerges):
Citing hurricane damage to the oil and gas industry in the Gulf of Mexico, key lawmakers are trying to relax a decades-old federal ban on new drilling off California and the Atlantic Seaboard and to encourage energy prospecting in the Rocky Mountains.
Congressional proposals also aim to waive some air pollution rules to encourage expansion of oil refineries and to authorize oil drilling beneath Alaska's Arctic National Wildlife Refuge.
Whether this is an efficient proposal depends on the benefits and costs of increasing oil drilling in coastal areas and public land. The costs of drilling include the lost park amenities and the lost beach trips and other ocean amenities in case of an oil spill. Not much is known about the magnitude of these costs.
The benefits of increased drilling is measured by the lower prices of energy that would result. In the case of oil, the market price is set by the global supply. A small increase in the U.S. supply of oil won't much affect the market price so the benefits to consumers is small. When oil prices are high, the benefits to energy firms can be high (e.g., ANWR ... ready ... set).
Another benefit of increased drilling is avoiding macroeconomic shocks. The energy industry is using this one but all information is not available on whether the Katrina price spike is a negative macroeconomic shock that triggers a recession or simply a blip. James Hamilton is skeptical that a recession will result (pointing out that the Fed could slow down their interest rate increases). Ben Bernanke says it is a blip.
