Bush: Lift ban on offshore drilling

NEW YORK (CNNMoney.com) -- President George Bush, saying the United States "must produce more oil," called Wednesday for a lifting of the ban on offshore drilling.

"Congress must face a hard reality," Bush said. "Unless members are willing to accept gas prices at today's painful prices or even higher, our nation must produce more oil, and we must start now."

The remarks highlight the growing political pressure to reduce dependence on foreign oil and deal with rising gas prices. The issue has become central to the presidential election as $4-a-gallon gas and has become a drag on an already sluggish economy.

Bush outlined a four-point plan to increase domestic oil supply.

The first step, Bush said, is to expand domestic oil supply by allowing drilling in the outer continental shell. He asked Congress to lift a federal drilling moratorium on offshore drilling. He said he would then lift an executive order that also bans drilling.

Bush also called on Congress to:

• Increase access to oil shale
• Permit oil exploration in the Arctic National Wildlife Refuge
• Increase domestic refining capacity

"With these four steps we will take pressure off gas prices over time by expanding the amount of American made oil and gasoline," Bush said.

Bush said his plan would also create jobs. Because the initiatives will years to implement, he urged swift action by Congress.

"If congressional leaders leave for the Fourth of July recess without taking action, they will need to explain why $4-a-gallon gas is not enough incentive for them to act," Bush said.

Pelosi responds

House majority speaker Rep. Nancy Pelosi, D-N.Y., criticized Bush's plan. She said in a statement that it would increase America's "addiction to fossil fuels and dependence on an oil industry earning record profits."

"The fact is that America uses a quarter of the world's oil consumption every day - but only 1.6% of the world's supply - so there's simply no way to drill a solution," Pelosi said.

Drilling and the election

John McCain called for a lift in the offshore drilling ban Tuesday. McCain's plan would let individual states decide whether to explore drilling possibilities off their shores.

Critics of offshore drilling claim the practice harms aquatic ecosystems by eroding wetlands, contaminating the water with chemicals, polluting the air, killing fish and dumping waste.

Presumptive Democratic candidate Barack Obama called McCain's offshore drilling plan "short-term political posturing." Obama prefers a profits tax on oil companies and investment in renewable energy sources.

Will drilling work?

Oil executives often point to the ban in offshore drilling as part of the reason gas prices have risen so high. Experts estimate that offshore drilling could yield 1 million to 2 million barrels of oil per day by sometime in the next decade.

However, some analysts do not see new drilling projects as a panacea, given the amount of time it would take to get them up and running and the relatively small amount of oil they would likely yield. Places like the Atlantic coast, thought to be rich in natural gas, lack drilling platforms, pipelines, terminals, storage facilities and other energy infrastructure. Developing such areas will take a great amount of time and money.

"Even if you opened up everything and the states did not object, you are not going to get any oil out of the ground for two to five years," said Robert Kaufmann, director of Boston University's Center for Energy & Environmental Studies. "In the short-term it will have absolutely no effect."

Oil prices reflect global supply-and-demand trends, not domestic ones. So the increase in U.S. production would have to outweigh international demand in order to have a meaningful impact on prices. Experts expect world oil consumption, currently at 85 million barrels per day, to swell to more than 100 million barrels per day by 2025.

"U.S. firms are not going to sell to U.S. customers for prices any cheaper than they could sell to to anyone else in the world," Kaufmann said.