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Understanding the Costs and Benefits of Deepwater Oil Drilling Regulation

Author

Listed:
  • Krupnick, Alan

    (Resources for the Future)

  • Campbell, Sarah
  • Cohen, Mark A.

    (Resources for the Future)

  • Parry, Ian W.H.

    (Resources for the Future)

Abstract

The purpose of this paper is to provide a conceptual framework for understanding how analysis of costs and benefits might be incorporated into an assessment of regulatory policies affecting deepwater drilling. We begin by providing a framework for analyzing the life-cycle impacts of oil drilling and its alternatives, including onshore drilling and importing oil from abroad. We then provide background estimates of the different sources of oil supplied in the United States, look at how other oil supply sources might respond to regulations on deepwater drilling, and consider the economic costs of these regulations. After providing a comprehensive description of the potential costs and benefits from various types of drilling—including, when possible, estimates of the magnitude of these benefits and costs—we discuss the extent to which these costs and benefits may already be taken into account (or reinforced) through the legal, regulatory, and tax systems and through market mechanisms. We conclude by presenting a framework and simple example of how a cost–benefit analysis might be used to inform regulation of deepwater drilling, and sum up the policy implications of our work.

Suggested Citation

  • Krupnick, Alan & Campbell, Sarah & Cohen, Mark A. & Parry, Ian W.H., 2011. "Understanding the Costs and Benefits of Deepwater Oil Drilling Regulation," RFF Working Paper Series dp-10-62, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-10-62
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-10-62.pdf
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    References listed on IDEAS

    as
    1. Delucchi, Mark A. & Murphy, James J., 2008. "US military expenditures to protect the use of Persian Gulf oil for motor vehicles," Energy Policy, Elsevier, vol. 36(6), pages 2253-2264, June.
    2. Cohen, Mark A., 1986. "The costs and benefits of oil spill prevention and enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 13(2), pages 167-188, June.
    3. Muehlenbachs, Lucija & Cohen, Mark A. & Gerarden, Todd, 2011. "Preliminary Empirical Assessment of Offshore Production Platforms in the Gulf of Mexico," RFF Working Paper Series dp-10-66, Resources for the Future.
    4. Cohen, Mark A. & Gottlieb, Madeline & Linn, Joshua & Richardson, Nathan, 2011. "Deepwater Drilling: Law, Policy, and Economics of Firm Organization and Safety," RFF Working Paper Series dp-10-65, Resources for the Future.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    catastrophic oil spill; cost-benefit analysis; government regulation; liability;
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