Don't Let High Oil Prices Fool You - More U.S. Drilling Is Not the Answer

With oil prices briefly topping $100 per barrel, some are dusting off the tired "drill baby drill" playbook and calling for an expansion of domestic oil and gas drilling - ignoring the point that opening up access to the Pacific, Atlantic and eastern Gulf regions, which are currently off-limits to drilling, would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.

The Energy Information Administration estimates that if the ban on drilling remains in place, the average U.S. price of motor gasoline will be three cents per gallon higher than if we open these areas to drilling. That's because the U.S. isn't Saudi Arabia; we sit on only 1.6 percent of the world's oil reserves, while the Saudis have 20 percent. Dumping our little pond of oil into the giant sea of global reserves can't make a significant dent on our imports or impact prices.

Some argue that recent unrest in Egypt and Libya present legitimate threats to supply and therefore justify the oil price run-up. While Libya is an oil exporter, Saudi Arabia already has lined up replacement exports, and protests have not hit that country.

What will make a significant dent in the short term is clamping down on the excessive speculation that's driving the higher prices. To be sure, speculation has a necessary role, but it's one thing for speculators to operate on the margins, and it's quite another for them to dominate and drive the market. Congress understood this when it passed the Dodd-Frank financial reform bill last year, which, among other things, ordered the Commodity Futures Trading Commission (CFTC) to restore transparency to these energy trading markets. But under intense industry lobbying, the CFTC is punting on some of the more critical rules, including establishing firm position limits.

So here's what Congress can do right away to address the problem:

1. Send clear orders to the CFTC that it needs to enact firm, binding position limits on traders, and require all trades to occur on exchanges fully regulated by the CFTC. This will limit the ability of speculators to continue to drive the market.

2. Minimize our exposure to oil prices by fully promoting plug-in electric vehicles, increasing fuel economy standards to 60 miles per gallon, fully funding mass transit and financing free transit service for two years to increase ridership.

3. Hold Big Oil accountable by repealing its existing tax breaks, reforming oil royalties and ensuring strong worker safety and environmental protection with drilling. This is something that the tea party ought to get behind, since Sarah Palin pushed through one of the largest tax increases in history on Big Oil when she was Alaska's governor.

4. Impose a windfall profits tax to help finance an expansion of the hybrid car tax credit and mass transit investments.