(AP)
The United States will take steps to dramatically increase domestic oil and natural gas production, President Obama announced over the weekend, an answer to pro-drilling Republican critics and what the press called “voter anger” over high gas prices.
Opened to drilling almost immediately will be the Alaska National Petroleum Reserve. Explored for likely future oil and gas drilling will be vast swaths of the central and southern Atlantic coastline of the United States, areas that had been marked by the government as off limits for at least several more years.
They are moves with long-range and irreversible consequences based on the highly volatile price of oil, which has spiked this year only to crash in recent weeks as speculators tinker with the market (and Big Oil rakes in record profits). But faced with political and public pressure, the White House said they felt a need to act.
The president’s decision will result in the opening of tens of millions of acres in Alaska to oil companies and potentially letting unprecedented drilling commence off of the Atlantic coast only a year after the explosion of a BP offshore oil rig caused an economic and ecological calamity in the Gulf of Mexico. Also affected will be the Gulf of Mexico, where drilling leases will be extended despite unfinished safety reviews in the wake of 2010′s BP disaster.
President Obama said the moves he ordered make “good sense.”
Administration officials said the president’s announcement, which included plans for expanded drilling in Alaska and the prospect of new exploration off the Atlantic coast, was intended in part to answer those arguments, signal flexibility and demonstrate his commitment to reducing oil imports by increasing domestic production.
But in fact the policies announced Saturday would not have an immediate effect on supply or prices, nor would they quickly open any new areas to drilling.
“These spikes in gas prices are often temporary,” Mr. Obama said, “and while there are no quick fixes to the problem, there are a few steps we should take that make good sense.”
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In his weekly radio and Internet address, Mr. Obama said the administration would begin to hold annual auctions for oil and gas leases in the Alaska National Petroleum Reserve, a 23-million-acre tract on the North Slope of Alaska. The move comes after years of demands for the auctions by industry executives and Alaska’s two senators, Lisa Murkowski, a Republican, and Mark Begich, a Democrat.
The administration will also accelerate a review of the potential environmental impact of drilling off the southern and central Atlantic coast and will consider making some areas available for exploration. The move is a change from current policy, which puts the entire Atlantic Seaboard off limits to drilling until at least 2018.
The president also said he would extend leases already granted for drilling in the Arctic Ocean off Alaska and the Gulf of Mexico that had been frozen after the BP spill last year. The extension will allow companies time to meet new safety and environmental standards without having to worry about their leases expiring.
Left unanswered is how expanded domestic exploration and new drilling will impact the price of a barrel of oil on the global market or the price that ordinary Americans pay at the pump.
The most simple answer is that absolutely nothing will change. Obama himself said there are “no quick fixes,” and the decision to commence more drilling will have “hardly any impact on gas and oil prices.” And an energy expert calls “drill drill drill” a “tired” and “simplistic” approach.
Every time gas prices reach record highs the call goes out for more oil drilling. This year it’s no different.
“The Gulf is ready to get back to work to help create jobs and lower gasoline prices,” Washington Republican Doc Hastings, head of the House Natural Resources Committee and a big proponent of more drilling, said last week.
The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices.
That’s because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes.
Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production.
“This drill drill drill thing is tired,” said Tom Kloza, chief oil analyst at the Oil Price Information Service, which calculates gas prices for the motorist organization AAA. “It’s a simplistic way of looking for a solution that doesn’t exist.”
The U.S. government itself actually looked into the potential effect of increasing domestic oil production, and whether it would have a significant impact on the price of gasoline. The Energy Information Administration (EIA) ran a study that found pump prices would be three cents a gallon lower by 2030 with increased offshore drilling and oil production.
And is there a need for either increased drilling or opening new, unleased lands or offshore areas to exploration by oil companies? The data contradicts the president.
More EIA statistics reveal that 2010 was a banner year for oil production in the United States. Despite the massive BP spill in the Gulf of Mexico and a temporary ban on deepwater drilling and leases in the Gulf, last year saw the highest oil production levels since 2003.
Look at the chart below of crude oil production in the U.S. The amount of domestic oil produced soars in the last two years, just about at the same time as global oil prices jumped. Increasd U.S. production did nothing to change the price.
And even when oil and gas companies hold leases on land or in offshore areas, they are incredibly inefficient in exploiting these areas.
While the president and Republicans in Congress are prepared to open huge chunks of Alaskan wilderness and our coastline to drilling, the government reported earlier this year that over two-thirds of existing offshore leases in the Gulf of Mexico were idle and unexplored, while almost half of existing land-based leases held by oil and gas companies were unused.
More than two-thirds of offshore leases in the Gulf of Mexico are sitting idle, neither producing oil and gas, nor being actively explored by the companies who hold the leases, according to a Department of Interior report to be released Tuesday.
Those inactive swaths of the Gulf could potentially hold more than 11 billion barrels of oil and 50 trillion cubic feet of natural gas, Interior said in the report obtained by The Associated Press.
President Barack Obama ordered the report earlier this month amid pressure to curb a spike in gasoline prices following instability in the oil-rich Middle East. The White House said Obama would outline his plans for America’s energy security in a speech in Washington Wednesday.
The inefficiencies detailed in the Interior Department report also extend to onshore oil and gas leases on federal lands, with 45 percent of those leases deemed inactive. The department said it is currently exploring options to provide companies with additional incentives for more rapid development of oil and gas resources from existing and future leases.
“These are resources that belong to the American people, and they expect those supplies to be developed in a timely and responsible manner and with a fair return to taxpayers,” Interior Secretary Ken Salazar said in the report.
Gas prices won’t be affected. Fungible commodity, world market, growing global consumerism, American demand/supply imbalance, years to get to market and Big Oil controls the supply. Big Oil will not drill baby drill to flood the market, glut the supply, and crash oil prices. You are a fool if you think they are benevolent and really want their customers to pay them less. This is a political stunt.
“Rex Tillerson, the head of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds.”
From the mouth of the beast comes an admission—Big Oil is gaming the system to keep prices high. Yeah let’s keep handing over more publicly-owned minerals, along with billions in taxpayer financed tax breaks…
Obama has made up his mind not to lose the 2012 election because of high gas prices. And he can’t do anything on climate change unless the Democrats hold the Senate and make gains in the House. Part of the strategy is to get Repubs so far to the right that they fall off a cliff. I think/hope we’ll see a different Obama after the election.
Big Oil said last week that they would cut jobs without govt subsidies. Legal? Threats? If I had 167 unused oil leases, should you give me more leases? The Gulf is ruined. Now another ecosystem is going to be ruined. The next presidential election is going to be such fun and full of anomalies.