Free Markets, Free People

oil production


Private oil sector pushes US past Saudi Arabia in output

Funny … despite all the impediments the Obama administration has put on oil production on public land, the private sector – the market – has pushed us into a position we’ve never been in before in terms of output of oil and gas.   We’ve passed the Saudi’s in output:

In spite of the Obama Administration’s hostility to carbon-rich energy, private actors with private capital deployed on private (and state) land have launched a game-changing revolution in domestic oil and natural gas production.

A scarcely reported milestone conveys the magnitude of this turnaround in the global energy landscape.

The U.S. passed Saudi Arabia as the world’s largest petroleum producer in November 2012, according to recently released data of the federal Energy Information Administration.

Now, imagine where we’d be if we didn’t have an obstructive administration bent on punishing those producers in that market via high taxation and regulation.  Or slow-walking permits for drilling on public land.  Or any of a myriad of other things this administration does to try to prevent oil and gas production.  Well, other than taking credit for the rise in production when they had nothing to do with it.

Had they gotten out of the way, had they helped us take advantage of these new finds, Saudi Arabia would have been in our rear view mirror a long time ago and my guess is, gas wouldn’t cost what it does today.

~McQ


Obama claims oil a “fuel of the past”

Here we go again:

As rising gas prices become a key issue on the campaign trail, the president argued that using less oil is an important part of the solution.

“We’ve got to develop every source of American energy; not just oil and gas, but wind power and solar power, nuclear power, biofuels. We need to invest in the technology that will help us use less oil in our cars and our trucks, in our buildings, in our factories. That’s the only solution to the challenge, because as we start using less, that lowers the demand, prices come down,” the president told workers at the Daimler Trucks manufacturing plant in Mount Holly, N.C.

Yet in the same speech he calls oil “the fuel of the past”.

Is it?

Of  course not.  It is a fuel he’s decided he no longer wants to pursue for political reasons based in very shaky science.  But fuel of the past?  Fossil fuel is more of a part of our lives now than it has ever been and while alternate fuels are desirable, they’re not even close to being ready for prime time despite massive investment for decades.  But oil a fuel of the past? 

Absurd.

This is typical Obama – try to have it both ways.  Talk about developing “every source of American energy” to include oil and gas and then claim that oil is a ‘fuel of the past’.  That’s a not so subtle reminder that he really doesn’t support fossil fuel production (and hasn’t – see his claims about the “oil industry subsidy”), despite the continuous attempt to take credit for increased oil production during his time in office when his administration has had no hand in it).

The president continued to defend his “all-of-the-above” strategy against Republican attacks on his energy policy. “If somebody tells you we’re not producing enough oil, they just don’t know the facts,” he said.

Really? Well, we’re not, and that’s a fact.  We could be producing much, much more if the Obama administration would get out of the way.  The little known truth about the so-called “fact” Obama throws around about oil production being at its 8 year high, is he had nothing to do with that.  And furthermore, next year, we’ll see a significant decline in production from the lands the federal government controls (it will conveniently happen after the election, of course).  Note the final paragraph below.  It points to another reason why Obama’s claim is disingenuous:

The federal government controls about a third of the nation’s oil production, through federal onshore leases (mostly in the West, where it owns half the land) and leases to drill in outer continental shelf (OCS) starting 10 miles off the coast. The rest of America’s oil production is on state-owned land (including coastal areas) and on private lands subject to state regulation.

As a direct result of the president’s severe constriction of oil production under federal leases, domestic U.S. oil production will be nearly one million barrels per day lower this year than it would have been otherwise.

Meanwhile, production from newly available shale oil and oil sands on private and state-owned land has been booming—more than enough to make up for the steep decline in production under federal leases. That boom, combined with slackened demand since the start of the recession, has reduced America’s dependence on foreign oil to about half its daily consumption of 20 million barrels per day, down from 60 percent in 2005.

In fact, the truth is much different than the Obama claim in which he attempts to take credit for today’s oil production:

Even in the few areas of the OCS that remain open, the administration is seeking to strangle production. As a result of the various deep-water drilling moratoriums, a third of the Gulf’s deep-water drilling rigs have left for other shores, dissuaded by the regulatory uncertainty. As a result of the shallow-water “permitorium” even shallow-water drilling has slowed to a crawl. According to the Department of Energy, oil production from the Gulf of Mexico will drop by 700,000 barrels per day by the end of 2012, which further decreases in ensuing years. And as for America’s working families, the combination of moratoriums and “permitorium” are estimated to have cost 60,000 thousand jobs in 2010 alone.

On federal lands the story has been the same. Just as technological breakthroughs have paved the way for tapping into the vast oil reserves of the Rocky Mountain states, the administration cut the number of new leases by 50 percent in 2010 alone.

Oil is not a “fuel of the past”.  Obama’s agenda actually demands we abandon it.  And he would in a New York minute if there wouldn’t be electoral consequences.     His administration’s track record concerning oil and gas exploitation as well as new regulatory regime the EPA is implementing and actions of Secretaries Chu and Salazar give lie to the claims made.

Oil and gas are, in fact, the critical fuels of the future.  It is and will remain the lifeblood of our economy for decades.  An administration that doesn’t realize that and works to curtail it deserves to be shown the door at the earliest possible opportunity.  If you think gas prices are high now, remember that without the increase in oil production on state and private land, it would be higher than it is now.

Unicorns and moon-ponies (or pond scum) won’t fuel the economy.  Oil will.  And an “all of the above” strategy should obviously include massive increases in oil production on federal lands.  Don’t let this guy get away with his false claims and destructive energy policy.  Help show him the door, November.

~McQ

Twitter: @McQandO


About the rise in oil production

You probably remember these lines in President Obama’s State of the Union address this year:

Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources.  (Applause.)  Right now — right now — American oil production is the highest that it’s been in eight years.  That’s right — eight years.  Not only that — last year, we relied less on foreign oil than in any of the past 16 years.  (Applause.)

Anyone … what’s the implication?  Yes, that’s right, the implication is that this president and his administration have worked tirelessly to aid in the exploitation of oil during his three years in office.   And he’s right about one thing, American oil production is the highest its been in eight years.

But it true despite of him and his administration, not because of them.  The rise in oil and gas production has been because of an increase in production on state and private land, not federal land as this chart demonstrates:

 

Oil-and-Gas-2010-2011

 

Another myth destroyed.  In fact, as most who’ve followed this administration’s energy policies for three years know, they’ve been anything but friendly toward the petroleum industry.  The chart simply quantifies how unfriendly they’ve been.  In fact, if it wasn’t for production on state and private land, we’d be looking at the lowest production in eight years. 

Oh, by the way, another myth was also offered up that night in an appeal to justify more money to “green” energy, i.e.:

But with only 2 percent of the world’s oil reserves, oil isn’t enough.  This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.  (Applause.)  A strategy that’s cleaner, cheaper, and full of new jobs.

According to the Institute for Energy Research’s North American Energy Inventory published in December of 2011, the total recoverable oil resources in North America (and that obviously includes Canada) is 1.79 trillion barrels, or “enough oil to fuel every passenger car in the United States for 430 years”.  Any guess why Keystone XL is so critical?

The problem, according to IER isn’t that we have low proven reserves (the usual figure backing that 2% number is 20 billion barrels).  The problem is where there are recoverable oil reserves there are also federal prohibitions against drilling and exploiting those reserves.  The US has 1.4 trillion barrels in recoverable oil with the largest deposits located offshore, Alaska and in the Rocky Mountain West’s shale.  Combined with Canadian and Mexican resource’s, the total recoverable oil in North America is 1.79 trillion barrels or, as the IER points out, “more [oil] than the world has used since the first oil well was drilled over 150 years ago…”.  If you need more context, Saudi Arabia has about 260 billion barrels of proven oil reserves.

And if you really want to see some eye-popping numbers, take a look in the IER Energy Inventory at our gas reserves.  At current natural gas generation levels, there are enough recoverable gas resources to provide the US with electrical energy for 575 years.

If we do what is necessary to recover it.

The myth of America being an energy poor country is just that, a myth.  And, as the State of the Union proves, it is still used by those who are determined to scare Americans into accepting their more expensive (and thus heavily subsidized) alternatives.  The Co2/global warming/cap and trade scare has failed.  The alternative is to claim we don’t have the petroleum base to support our consumption.  It simply isn’t true.

But you can count on continuing to hearing both myths continued during this election year. 

Don’t buy into them … demand the federal government get the hell out of the way and let us do what is necessary (safely and sanely) to exploit the tremendous petroleum and gas reserves we enjoy.

~McQ

Twitter: @McQandO


Want a jobs program that will actually benefit America and its security? There’s one available …

Check out this graphic:

 

key-to-energy-security

 

Right now the US imports about 70% of its oil.  30 years ago, we only imported 28%.   What happened? 

Well our economy boomed, we created a huge demand for more oil and we had to find other sources.   But that’s not the only reason.  The government of the US hasn’t been the most helpful ally in this battle for resources.   ANWR is the perfect example of what not to do politically.  The Clinton era narrative of “it will take 10 years before we have anything” rings hollow right now some almost 20 years later.  Obviously had we done what was necessary then, we’d be reaping the benefit now.

But that graphic is stunning, don’t you think?   In a partnership with Canada (the country from which we import the most oil and it is a extraordinarily secure source), who now provides about 20% of our total consumption (US + Canada = ~ 58% of our annual total), we could be 92% self-sufficient in 20 years.  What that would mean is we could get that other 8%, for instance, from Mexico (now providing about 10% of the total).  Or not.  We’d no longer be held hostage by an oil cartel and unfriendly or unstable countries.

Right now 30% of our imports come from Saudi Arabia (2), Venezuela (4), Nigeria (5), Iraq (6), and Algeria (8).   We could eliminate every one of them as a supplier.  Every. One.

Of course that means doing something politically now.  But that doesn’t seem to register with this administration.  And that seems funny given the obvious screaming need for them to be seen creating jobs and driving the unemployment rate down.

Check out these numbers from a study by Quest Offshore Resources done at the behest of the American Petroleum Institute and the National Ocean Industries Association.

Key findings:

  • Total offshore-related oil and gas employment could hit 430,000 in 2013 if the permit slowdown is reversed, including about 187,000 new jobs.
  • New policies could result in a 71 percent increase in oil and natural gas spending in the Gulf to $41.4 billion.
  • Texas (will reach 149,000 jobs) and Louisiana (129,000) would gain the most from a return to normalcy in the Gulf, but the jobs impact would touch a number of non-Gulf states as well – including California, Pennsylvania, Ohio and Michigan, Quest says.
  • Tax revenues would accrue to all levels of government "if the government pursues a balanced regulatory approach that allows for the timely development of the backlog of (Gulf) projects in an environmentally responsible manner." Said API President and CEO Jack Gerard: "We need to create taxpayers, and that’s what this would be doing."

Result?  A 20 year program that would result in jobs, revenue and energy resources.

Seems like a no-brainer right?  Politicians are currently embroiled in debt ceiling negotiations, but take a look at what doing something like this would mean:

By granting comprehensive access to U.S. oil and gas reserves, $4 Trillion in state and federal revenue could be generated to fill American treasuries and eliminate nearly 30 percent of the national debt.

That growth would spur new jobs – lots of new jobs:

530,000 jobs could be created with increased access to U.S. oil and gas resources. To put that in perspective, that would provide enough jobs to employ 85 percent of Vermont’s entire population. By 2015, development of the Marcellus Shalealone could create 160,000 jobs in Pennsylvania, 20,000 jobs in New York and 30,000 jobs in West Virginia. Add that to the 9.2 million Americans currently employed by the oil industry and you’ve got the economic engine powering our economy and our way of life.

That is how you turn an economy around.  That is how you increase revenues to government.  That is how a smart government would approach the current problem (and in more areas than just gas and oil).

Instead we have the “permatorium”.   If you’re wondering why this isn’t happening, you need to ask the administration:

"The slow pace of Gulf development since the accident has cost jobs, revenue and energy production," said API President and CEO Jack Gerard. "The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We’ve done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever," Gerard added.

The “accident” of course is the spill in the Gulf.  And Gerard is right.  This slow down, after the industry has “raised the bar on safety” is inexcusable.  Especially in this unemployment climate.  Especially in this economic climate.  Especially with tax revenues down.  And especially with energy insecurity so prevalent.

9.2% unemployment, a slowing economy, a revenue starved government, a country suffering from energy insecurity and a huge part of the answer sitting right there in front of them – and they refuse to act. 

~McQ

Twitter: @McQandO


What do you do when your government flat out lies to you?

It’s a rhetorical question for the most part, since it seems to be a daily occurrence anymore.  Obviously it is hard to trust any government that does that on a regular basis and with a straight face.  But that’s what we’re faced with.  The latest example comes from Ken Salazar, head of the Department of the Interior, and as usual, he’s dissembling about oil production.

Kyle Isakower at API’s “Energy Tomorrow” blog, brings us up to date on some of Salazar’s numbers:

Last week, Interior Secretary Ken Salazar told Congress that oil production in the Gulf of Mexico "remained at an all-time high, and we expect that it will continue as we bring new production online."  He claimed: "In 2009 there were 116 rigs in the Gulf of Mexico, in 2010 in February, 120, in February 2011, 126."

Key points: production “remained at an all-time high” last year.  And that such a state would continue to exist as “we” bring new production online.  Additionally, Salazar claims an increase of 10 rigs in the Gulf of Mexico from 2009 to last month.

Not true says Isakower citing Baker Hughes:

  • Four days before the Deepwater Horizon accident there were 55 rotary rigs actually drilling offshore in the Gulf of Mexico.
  • On May 28, 2010, when the administration announced the six-month moratorium on deepwater drilling, there were 46 rotary rigs operating in the Gulf. 
  • Last week, 25 rotary rigs were operating in the Gulf of Mexico.

The point of course is oil production comes from working rigs.  While there may be more rigs (by 10) in the Gulf, there are less working rigs (by 30) than in 2009.

As Isakower quips:

Claiming an increase in idle rigs in the Gulf as a success story is like claiming the job market is great because a lot of people are unemployed and available to work.

As for the production figures and the claim by Salazar that production remained at “an all time high” is technically true, the next part of his claim is demonstrably false.  Isakower explains:

The Energy Department’s Energy Information Administration reports that production in the Gulf of Mexico is in decline, forecasting a decline of 250,000 barrels a day from Gulf production, due partly to the moratorium and restricted permitting.  While the annual production figure for 2010 was greater than 2009, EIA’s month-by-month production figures show a peak in May of 2010, and a relatively steady decline since. And EIA Petroleum Engineer Gary Long told trade publication E&E News that the rig count in the Gulf was cut in half after the Deepwater Horizon accident and that it wouldn’t rebound to previous levels until the end of 2011 under the assumption that the permitting process is restored to historical rates. Further, since there is a lag time from the time an exploration permit is approved to the time of actual production, and since no only a handful of permits for new wells have been granted since April of 2010, it is likely that Gulf of Mexico production will continue to be hit hard in 2012 and beyond.

If anyone is monitoring the permitting process as it stands today, they know that the assumption about the process that Long uses isn’t valid (1 permit granted this year that I know of and that just before the hearings at which Salazar spoke).  What that then means, as Isakower notes, is production in the Gulf will remain “hard hit” and lower than 2009 until well beyond 2012.

So, here we have a critical need (the production of more oil) that could produce thousands of good paying jobs, would boost a regional economy not to mention provide money for the federal treasury (taxes and royalties) and we have a government official claiming we’re at record levels and will remain there and beyond because “we” have more rigs in the Gulf now than we did 2 years ago.

API is relatively gentle about it saying, [w]e appreciate that when it comes to selling the administration’s energy policy, Secretary Salazar is in a tough position”.

I don’t have to be that diplomatic.  Salazar isn’t “selling” anything, he’s spinning nonsense to Congress.  There is no cogent or responsible energy policy evident from this administration.  Instead, it has declared war on a vital industry that is absolutely critical to our nation’s economy and, using the Deepwater Horizon disaster as an excuse, placed barrier after barrier in front of the industry for almost a year to discourage new drilling operations.

Unfortunately the war has been successful.  Drilling rigs have all but abandoned the Gulf to be deployed elsewhere around the world.  That is a travesty and an inexcusable outcome of a thoughtless policy pressed for political reasons.  Again, the administration spins nonsense to make it sound like they are on board with more oil production while doing everything in their power to block it.

The sad truth is the results of that “policy” will eventually be paid by you, at the pump, as gas prices continue to rise.

Remember that in 2012.  It is another part of the record of the Obama administration.  And in 2012, Obama has to do something he’s never done before in his political life – actually run on his record. 

~McQ