Save the Environment: Drill, Baby, Drill. Robert Hahn and Peter Passell. September 2008.

The audience’s mantra at the Republican National Convention – “Drill, baby, drill” – reflected deep frustration with Washington’s past decisions to lock down tens of billions of barrels of oil under American territory in an era of $4 a gallon gasoline. Whatever the merits of his argument, Barack Obama’s counter that “drilling is a stop-gap measure, not a long-term solution” won’t make the sting go away as long as it costs $100 to fill the tank of a pick-up truck.

The crux of the matter is how accelerated drilling would affect gas prices. And the conclusions of our own new research aren’t likely to please true believers on either side. We found that full-speed-ahead exploitation of reserves in the Alaska National Wildlife Refuge (ANWR) and under the relatively shallow waters of the outer continental shelf (OCS) that are currently off-limits to drilling would lower prices at the pump by a few cents, at most. Nonetheless, it’s equally clear from our calculations that the failure to develop these oil resources would cost the country hundreds of billions of dollars in royalties and taxes – and, ironically, pass up an opportunity for a grand bipartisan bargain that would preserve (or restore) huge swaths of wilderness that are a top priority of serious environmentalists.

Our projections of future oil prices are based on government estimates that some 7 billion barrels of oil could be extracted from ANWR and a whopping 11 billion barrels could be had from the restricted OCS. That translates into an extra million barrels a day in the year 2025 – one-sixth of projected domestic output.

A big deal, right? Not in the context of the current political debate. The markets in which oil prices are determined are global, not local, and the extra million barrels would represent one percent of total world consumption in 2025. After making reasonable assumptions about the sensitivity of world supply and demand to increases in oil production, we estimate that the million daily barrels would lower the price of crude by just 1.3 percent.  Altering the assumptions behind the calculations does change those numbers, but not by enough to change the bottom line. Even in the optimistic scenarios, the impact at the pump (which is just a fraction of the impact on crude oil prices) would likely be hard to detect against the background noise of the weekly ups-and-downs of fuel prices.

But wouldn’t the prospect of a future glut give the owners of already-developed reserves an incentive to sell more of their oil (at lower prices) today? Yes, if drilling in America’s restricted areas would, in fact, add enough to tomorrow’s global output. The numbers just aren’t there, however. Put yourself in Exxon’s (or Vladimir Putin’s) shoes: Would you accelerate oil production today because you feared a 1-3 percent drop in oil prices a decade or more down the road?

To many, that’s the end of the story. Why open a unique wilderness like ANWR or the ecologically fragile coastal waters in the OCS to drilling if it wouldn’t materially reduce Americans’ fuel bills? A good answer requires a shift in perspective, from the current focus of how drilling would affect oil prices to a more comprehensive economic framework for weighing the public and private benefits of drilling against the likely costs.

Assuming that crude will be selling for $100 a barrel, we estimate that the oil from ANWR and off-limits OCS would be worth close to $1.85 trillion. Add to that the extra benefit to consumers of paying slightly less for imported oil, as well as an estimate of the gains in output from being less vulnerable to supply disruptions, and the total benefit exceeds $2.1 trillion.

On the other side of the ledger, the expected costs of developing all that oil (including risks of environmental damage from pipelines and roads, as well as possible spills) would amount to a bit less than $400 billion. So, at a first cut, the decision to drill seems a no-brainer, generating a whopping $1.7 trillion in net benefits to be shared among producers, governments (both the states and the feds) and consumers.

Why, then, the controversy? Many environmentalists argue that this calculation leaves out the biggest cost of all: the loss of the intangible benefits Americans get from knowing that ANWR and the restricted portions of the outer continental shelf have been left untouched. The problem here is that, while such intangible “non-use” values are undoubtedly positive, their magnitude is extremely hard to measure. The best attempt to get a fix on the non-use value of ANWR yields a figure of just $11 billion. So most people, one would guess, would still find the case for drilling to be compelling.

Some people, however, would likely attach a much, much higher non-use value to ANWR. And whether you agree with them or not, their opinions count a lot because they are well represented in Congress on both sides of the aisle. Yet we believe there’s potential for a meeting of the minds here. If that $1.7 trillion in tangible net benefits could be spent on anything – in particular, on preserving wilderness that didn’t happen to sit astride vast quantities of oil – would you really choose to spend it on keeping human hands off ANWR and the OCS?

Of course, nobody (certainly not oil companies who bid for leases, or the State of Alaska) would willingly set aside the entire $1.7 trillion to public purposes. But one could imagine a political bargain in which several hundred billion of the $1.7 trillion went into an independently run fund with a charter to preserve wilderness in the United States or climate-stabilizing rain forests in Africa and Latin America. As little as, say, $100 billion would go a long way: the projected cost of preserving the entire Everglades against the multiple encroachments of the Florida economy is $11 billion, while a comprehensive restoration of 200,000 acres of Louisiana’s coastal wetlands would run to $18 billion.

For better or worse, “drill, baby, drill” is now widely viewed as the cure for what ails. Giving the public what it wants wouldn’t lower gas prices by any meaningful amount. But it would create an opportunity to mobilize opinion (and humungous sums of cash) in the name of good environmentalism and well as good economics.

Mr. Hahn is founding director of the Reg-Markets Center and a senior fellow at AEI. Mr. Passell is a senior fellow at the Milken Institute. Their new research paper, “The Economics of Allowing More Domestic Oil Drilling” is available here.

A shorter version of this article appeared in the New York Times.