Oil spill's ripple effect on gas prices, future drilling

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The massive oil spill in the Gulf of Mexico has prompted California's high-profile governor to back off plans for offshore drilling, while the environmental catastrophe has experts debating its effect on retail gas prices.

Gov. Arnold Schwarzenegger on Monday backed away from a drilling proposal off Southern California that officials hoped would raise $1.8 billion for state parks during the next 14 years.

The announcement was made in light of the oil slick spreading through the Gulf of Mexico.

"It will not happen here in California," Schwarzenegger said at a news conference. "If I have a choice between the $100 million and what I see in the Gulf of Mexico, I'd rather just figure out how to make up for that $100 million."

Schwarzenegger had pushed the oil drilling proposal, known as the Tranquillon Ridge project, since last year as a way to bring money to the state's bleeding general fund.

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Experts are divided on whether a massive oil spill in the Gulf of Mexico will cause higher retail gasoline prices.

"The oil spill is a serious, serious environmental story and probably a serious political story," said Tom Kloza, chief oil analyst for the Oil Price Information Service, which tracks gasoline prices for AAA.

But the spill is the result of a blowout at a single offshore rig and shouldn't affect overall U.S. oil production or gasoline prices, he said. "There's a lot of excess refining capacity" along the Gulf Coast.

Gas prices are likely to continue rising this week and could peak at a national average of $3, Kloza said. But pump prices tend to go up with increased spring and summer driving, and expectations of a rebounding economy have already driven up oil and gasoline prices on futures markets, he said.

U.S. retail gas prices average nearly $2.90 a gallon, up 4.9 cents in the last week and 82 cents higher than a year ago, the federal Energy Information Administration said Monday.

Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University in Dallas and a well-known economist, said the oil spill will contribute to higher pump prices "because of the uncertainty it creates," especially in regard to its potential to curb domestic offshore drilling.

"Without question, we're going to be looking at higher gasoline prices ... oil prices are already going up," said Weinstein.

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In other news directly affecting anglers, recreational and commercial fishing has been restricted for a minimum of 10 days in federal waters most affected by the oil spill, the National Oceanic and Atmospheric Administration announced.

The affected area is largely between Louisiana state waters at the mouth of the Mississippi River to waters off Florida's Pensacola Bay.

"NOAA scientists are on the ground in the area of the oil spill taking water and seafood samples in an effort to ensure the safety of the seafood and fishing activities," said NOAA administrator Jane Lubchenco. "Balancing economic and health concerns, this order closes just those areas that are affected by oil. There should be no health risk in seafood currently in the marketplace."

According to NOAA, there are 3.2 million recreational anglers in the Gulf of Mexico region who took 24 million fishing trips in 2008. Commercial fishermen in the Gulf harvested more than 1 billion pounds of finfish and shellfish in 2008.

NOAA is working with the state governors to evaluate the need to declare a fisheries disaster in order to facilitate federal aid to fishermen in these areas. NOAA fisheries representatives in the region will be meeting with fishermen this week to assist them.

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