Drilling in deeper water carries more risks, but why drill in deep water if it is so risky? Some say it is because environmentalists prevent drilling closer in. Some say we need domestic sources of oil for energy independence. And some say that deep drilling is subsidized but shallow drilling is not.
On the latter, the Deep Water Royalty Relief Act exempted oil companies from paying a 12 percent royalty in the deeper water. When crude was cheap the royalty was not an issue but as the price of oil climbed, it made more sense to drill in royalty-free deep water than in royalty-required shallow water.
For more, see "Why was BP Drilling in 5,000 Feet of Water Anyway?", Justin Sharon, Minyanville (via Yahoo Finance), 2010-06-11.
