University of Chicago Nobelist Gary Becker says the economic benefits from offshore drilling will be significant even if the price of oil declines from its present level. A windfall profit tax on oil companies, he says, will discourage future exploration and production.

Although the risks of offshore drilling are much harder to quantify than the benefits, I believe the shift in the benefit-cost ratio has been large enough so that the time has come to allow drilling. Norway and Great Britain, to take two examples, have allowed drilling in the North Sea for many years without suffering major environmental damage.

An excess profits tax that is expected to persist for many years discourages further exploration for oil simply because much of the profits on new oil production would be taxed away. In 1980, President Jimmy Carter introduced a windfall tax on oil companies to prevent them from profiting a lot from the high price of oil due to the Iran-Iraq war. An evaluation by the Congressional Research Service, a think tank that provides reports to Congress, concluded that the tax significantly reduced domestic oil production and raised oil imports. Disillusionment with the tax led to its abandonment in 1987. Yet the lessons from this fiasco have been forgotten, for since the post-Katrina rise in gasoline prices in 2005, members of Congress have made regular attempts to introduce legislation with a sizable excess profits tax on oil companies.