PYLE: Running on empty: The drilling ban one year later
It was one year ago when the Obama administration imposed a deep-water drilling moratorium on new oil and gas wells in response to the Deepwater Horizon tragedy in the Gulf of Mexico. For all practical purposes, the ban continues today - despite the administration’s pre-election announcement in October that it had lifted the moratorium.
In the 12 months since the moratorium was imposed, gas-pump prices and consumer anger have risen precipitously. “My poll numbers go up and down depending on the latest crisis, and right now gas prices are weighing heavily on people,” the president conceded recently. Indeed, with its potential to serve as the symbolic “Berlin Wall” of high gas prices, the administration is understandably going through lengths to conceal the existence of what has become a de facto “permitorium.”
President Obama himself tried to obfuscate the issue by pointing out that American oil production in 2010 had reached its highest level in seven years. “So any notion that my administration has shut down oil production might make for a good political sound bite, but it doesn’t match up with reality,” he said. But the reality, according to the U.S. Energy Information Administration (EIA), is that production from the Gulf of Mexico is projected to fall by 130,000 barrels per day in 2011 and by a further 190,000 in 2012, principally because of the moratorium and decline in drilling permits.
To make up the difference, the United States must import an extra 88 million barrels of oil each year, sending at least $8 billion each day to distant shores. Former President Bill Clinton correctly observed that there are “ridiculous delays in permitting when our economy doesn’t need it.” An independent study by Louisiana State University professor Joseph Mason found that the moratorium triggered the loss of 13,000 jobs in the Gulf region, with thousands more related job losses distributed throughout the country.
The production decline projected by the EIA is clearly factoring into consumer pain at the gas pump. When Mr. Obama took office, the average cost for a gallon of gas was about$1.85. Today, it costs American motorists $3.84 per gallon on average. If the moratorium ended tomorrow, the lag time between obtaining the permits, conducting the exploratory drilling, extracting the energy, refining it and finally making it available to the consumer would mean that oil production would not immediately increase. History and economic theory, however, predict that the potential for greater future oil production should provide relief to long-suffering American motorists. Immediate price decreases resulted in September 2008after then-Speaker Nancy Pelosi announced that the House would allow the congressional moratorium, then in place, to expire.
The administration continues its charade by granting a slow trickle of permits. The majority of these are for shallow-water operations, along with a sprinkling of “re-permits” for rigs that had been approved before the Deepwater Horizon incident. Each week’s delay can snowball into months or years given the large capital, human and technical resource requirements of these projects. At least seven rigs that operated in the Gulf have been relocated overseas for various periods while waiting for work in the Gulf.
But with the expected decline of production from U.S. onshore oil resources, the administration’s moratorium threatens America’s ability to meet its energy needs. Independent experts project that by 2020, deep-water oil production in the Gulf will account for30 percent of total U.S. production and nearly 95 percent of offshore production.
The moratorium continues despite the fact that industry and government have developed new control and subsea containment systems that provide the ability to respond to and contain a major spill quickly. Recently describing his reaction to the creation of containment options and the rapid-response systems now in place, William Reilly, former co-chairman of the presidential BP commission, said: “From where I sit, the major obstacles to drill have been removed.”
The president and his advisers can continue to deny the moratorium is in place or say no relationship exists between oil production and gasoline prices, but that would be a risky, and dishonest, energy policy for America.
Thomas J. Pyle is president of the Institute for Energy Research.
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