Will offshore drilling prove to be Nancy Pelosi’s Waterloo? Americans, stung by $4 gasoline prices, have lined up solidly behind efforts to expand offshore oil exploration. The House speaker, however, is ever more strident in her refusal to lift the moratoria on leasing federal waters off the East and West coasts of America, and in a portion of the Gulf of Mexico.

On July 14, President Bush removed the so-called presidential withdrawal prohibiting leasing, which had been imposed in 1990. Now, it remains for Congress to do the same for a separate moratorium which has been enacted every year since 1981.

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Last Friday, the confrontation on this issue turned the House of Representatives into a circus. The Democrats voted to adjourn the session for the August recess, but Republicans refused to depart, continuing to call for a vote on offshore drilling even as the leadership turned off the lights and microphones, plunging the chamber into darkness. C-SPAN, bereft of power, didn’t cover the fracas, which went on for several hours. Really, is it any wonder that Congress’s approval ratings are so dismal?

Ms. Pelosi’s disdain for offshore drilling (and for the American people, it would seem), stems from her view that granting oil companies the opportunity to explore for oil on federal lands is tantamount to a giveaway. She also seems to feel that the effort would, in any event, prove futile.

As to the first concern, it is a puzzle. Who else is going to drill for oil on our offshore lands? Are we to punish the oil industry for reaping huge profits by not allowing them to reinvest in domestic prospects? Is it really better to encourage them to take their cash flow overseas and look for oil in foreign countries than to seek reserves here? Would we rather invite oil companies backed by President Chavez or Prime Minister Putin to drill offshore in America?

Moving on, let us look at the opportunity that exists offshore. The American Petroleum Institute says that because of the leasing ban, the oil industry has not been able to use current technology to estimate reserves on the 85% of the lower 48 outer continental shelves that have been off limits. The U.S. Minerals Management Service estimates that these lands contain 18 billion barrels of oil and 76.5 trillion cubic feet of natural gas. (Including Alaska, the figure jumps to 86 billion barrels of oil and 420 trillion cubic feet of natural gas, representing 60% of the oil and 40% of the natural gas yet to be discovered.)

The API reckons the lower 48 figure to be conservative, since over time initial estimates of recoverable reserves have tended to be understated, and to increase as technology improves. For instance, reserves at Prudhoe Bay in Alaska were initially thought to be 7 to 9 billion barrels; by the end of 2005 the region had produced 15 billion barrels.

The truth is, we really don’t know. Advances in seismic technology have contributed to some recent exploration breakthroughs, such as the large offshore Brazilian discovery called Tupi. These same new tools could improve the oil industry’s ability to assess the potential of our own offshore acreage.

Ms. Pelosi also contends that oil companies are hoarding promising leased acreage instead of developing it; consequently, the industry is lying about its appetite for offshore leases. “It doesn’t make sense for anyone with commercially recoverable oil to sit on it,” an ExxonMobil spokesman, Alan Jeffers, counters. “We at Exxon are not financially constrained,” he says. “We’re opportunity constrained.”

It is true that not all leases are under development; it is also true that some may never be developed. Early seismic surveys may prove disappointing or a well drilled on an adjacent lease may dampen hopes for success.

Mark Urness, with the research firm Calyon Securities, says that the riskiness of deepwater offshore drilling (the most promising acreage is in 7,000 to 8,000 feet of water), and rising costs have restrained activity in recent years.

“Just because they’re not drilling on a lease doesn’t mean they’re ignoring it,” Mr. Urness says. “It’s a matter of judging risks. Costs have recently escalated dramatically. Development costs can run into the billions of dollars. Oil companies don’t have infinite amounts of capital; they owe it to shareholders to drill the best prospects.”

It isn’t just that costs have jumped. Analyst Lenny Zephirin of the Zephirin Group says the industry suffers from insufficient skilled oil field hands. “We have a real labor shortage, which accounts for about 80% of the rise in costs.”

The industry is also contending with a limited availability of equipment. Mr. Urness says: “There is certainly a shortage of deepwater rigs. There are about 200 rigs in existence now; most are under contract until 2011. There are currently about 90 under construction, about 80% of which are committed.”

However, these issues stand as nothing before $130 oil prices, which alter the equation on even the highest-risk prospects. Also, the industry is accustomed to rolling the dice. At least 11 wells were drilled on the North Slope before a commercial discovery was made, and the North Sea teased the industry with 50 disappointments before drilling turned up a winner.

Another argument against leasing offshore acreage is that such activity would not bring down gasoline prices right away since it might take 10 years or more to bring new fields into production.

This objection represents the worst kind of short-termism infecting our business and political leaders. By this immediate gratification standard, we would never have built railroads, or cross-country highways, or the Brooklyn Bridge. In any case, the presumption that we will no longer need domestic oil and gas supplies by the time these additional resources come on tap is nonsense. With luck, other sources of energy will be supplementing oil and gas; they will not supplant conventional hydrocarbons for decades.

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