Industry, with congressional Republican support, is seizing the current environment of high gas prices to make the case for the need for more, and faster, lease and permit approvals. They say its time to get on with the business of drilling, post the BP oil spill. They say increasing domestic supply will reduce pressure on oil prices and bring down the price of gasoline.
“The message that Congress needs to send to the marketplace right now is that help is on the way,” said Jack Gerard, president and CEO of the American Petroleum Institute, the main organization representing the country’s drilling giants during a weekend interview with C-Span “Newsmakers.”
Recent surveys have shown strong support from the American public for increasing domestic oil and gas drilling. A CNN survey charted approval ratings upward of 70 percent.
The reality, experts say, is that increasing domestic supply of oil is not likely to affect the cost of gasoline very much, although there may be other benefits.
“It can help at the margins, but it is important to understand that the price of oil is set at the global market, and the global demand for oil is about 86 million barrels a day,” said Paul Bledsoe, senior adviser with the Bipartisan Policy Center’s National Commission on Energy Policy.
The United States produces about 10 million barrels a day, about 14 percent of the world’s oil supply.
“Our own ability to affect price on either supply or demand is moot. That is nonexistent,” Bledsoe said.
The biggest benefits to increasing domestic production are reducing the trade deficit, and jobs, Bledsoe said.
Averting a Slowdown
The multibillion dollar oil and gas industry supports an estimated 9.2 million American jobs. Industry is poised to invest billions more, but is awaiting the government’s permission.
The explosion on the Deepwater Horizon rig on April 20, 2010, that started the largest oil spill in American history, had devastating economic and environmental impacts, and cost 11 American lives. A drilling moratorium was imposed by the administration in its wake, allowing time for an investigation.
The National Commission on the Deepwater Horizon Oil Spill concluded: “The immediate causes of the Macondo well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry.”
Since then, a massive overhaul of the regulator has been underway. Industry has responded with enhanced safety plans to meet the new requirements, most significantly: a billion dollar oil spill containment system built with pooled industry dollars for use in the event of a future accident.
It was completion of the containment system that led permit approvals to resume in February, said Michael R. Bromwich, director of industry regulator, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), in a recent speech.
While current domestic oil production is at its highest in 25 years, at around 10 million barrels a day, supply is projected to drop off starting in 2012.
The reason for the decline and cause for concern is the long time, three to seven years, required for new leases to reach production status.
Setting the Restart Button
Anxious to get things moving again, House Republicans passed a bill this week, “Restarting American Offshore Leasing Now Act,” to require a series of lease sales in the Gulf of Mexico and off the coast of Virginia that have been delayed or canceled since the spill.
Later this week, a second bill, is also expected to pass. “Putting the Gulf Back to Work Act,” would require that drilling permits be acted on within 30 days of receiving an application.
Gerard said the bills do not preclude the new environmental and safety regulations that have been put into affect.
“We can continue to focus on safety as a top priority and still produce the oil and natural gas the country needs. There is no reason it has to be either or,” said Gerard.
Both bills must pass the Senate and be signed by the president before becoming law. The president has indicated recently that he wants to expand domestic drilling, as well as expand the use of alternative energy technologies, to achieve a goal of reducing oil imports to the United States by a third within 10 years.
“The administration is under considerable pressure due to the rise in gas prices to expedite these permits, and they may very well do that,” said David M. Konisky, professor with the Georgetown Public Policy Institute.
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