Free Markets, Free People

drilling

Who is “we” Mr. President?

Today, in his usual fashion, President Obama tried to pretend  he was doing something he’s not:

"So do not tell me that we’re not drilling. We’re drilling all over this country. There are a few spots we’re not drilling. We’re not drilling in the national mall. We’re not drilling at your house. "

We’re not drilling on most federal land either, whether onshore or offshore.  And where we are, production is down significantly.

And that’s just a fact, Jack.

~McQ

Twitter: @McQandO

Marcellus shale — a job boom brought to you by drilling, drilling and drilling

This could be happening on federal land as well, if the Obama administration would get out of the way.  The Marcellus shale formation, found in Pennsylvania and New York, is reviving parts of the Rust Belt and providing good paying jobs for the area and much needed energy for the nation.  The article is from the Pittsburg Tribune-Review:

Largely because of energy sector growth, including drilling for gas in Marcellus shale, life is changing for people in Washington County. Its job growth ranked in the top five nationally when federal statistics trackers compared the first and second quarters of 2011 to the year prior.

Butler County, bolstered by Westinghouse Electric Co.’s move from Monroeville, ranked near the top nationally in job and wage growth, according to the U.S. Department of Labor.

The drilling industry has helped people across Pennsylvania, said Kurt Rankin, an economist with PNC Financial Services Group, Downtown.

"It’s like found money," Rankin said. "It does have a secondary spillover effect in that the jobs that are created there are relatively high-paying jobs. That brings an entirely new income base to those counties."

From 2000 to 2007, the state recorded 17,000 to 20,000 workers in mining and logging, Department of Labor records show. That has jumped by more than 50 percent, largely since May 2009. More than 33,000 Pennsylvanians worked in that sector as of November.

MshaleThis is waiting to happen in many areas, but government and environmentalists continue to block much of it, especially on federal lands.  Despite Obama’s claim that “all-of-the-above” is his energy policy, his administration’s actions have hardly enabled this sort of growth in areas controlled by the federal government.  Sen. John Thune outlined the reality of the President’s energy policy and it doesn’t match the President’s rhetoric:

Over the past three years, the president has systematically discouraged new energy exploration and development. His proposed five-year offshore lease plan sharply restricts the sale of leases for energy exploration and bans energy development on 97 percent of the available offshore areas. Since Obama issued his six-month deepwater moratorium in 2010, the number of permits issued for offshore energy development has declined a staggering 40 percent to 50 percent.

As a result of the president’s policies, energy production in Alaska and the Gulf of Mexico is projected to decline. Energy production in Alaska is threatened to such an extent that the future viability of the Trans Alaska Pipeline System, a vital source of domestic oil, is now in question.

The president is also restricting energy production on federal lands. While energy production from federal areas was relatively high in 2010 and 2011, almost all of that production was from leases issued before he entered office. Under the Obama administration, the issuance of new drilling leases and permits to drill on federal lands has declined by 44 percent and 39 percent, respectively.

Is it any wonder that his only fallback position when confronted by higher gasoline prices is to look toward tapping the Strategic Petroleum Reserve (which is not there to help lower gas prices)?

All-of-the-above?  Another myth brought to you by the master of doublespeak.  Remember that when you’re pumping $5 a gallon gasoline this summer.

~McQ

Twitter: @McQandO

Obama finally figures it out–plans to fast track oil drilling in Alaska

The irony, of course, is inescapable.  Democrats, seeking answers to why gas prices were so high, spent the week grilling oil company CEOs and attempting to make “Big Oil” the scapegoat (btw, their “profits” are not the reason for high gas prices and cutting out their tax breaks won’t bring them down) … again.  And, we’ve had two years worth of the administration throwing roadblock after roadblock in front of oil companies trying to get permits to drill in the Gulf (so many months of delay, in fact, that most of the rigs idled have moved elsewhere in the world).

Now, suddenly, as November 2012 begins to creep inexorably closer, Barack Obama discovers the need for speed in exploiting oil and gas domestically – something we could be well into already if his administration hadn’t decided to essentially halt everything.

The broad energy plan, coming as gas prices continue to rise, would also fast-track environmental assessment of petroleum exploration elsewhere.

Yes, we now have an administration that, after two years of doing everything in its power to discourage oil companies, now claiming it suddenly “gets it?”  Sorry if I’m not buying yet.  After all,  with the other hand, it pursues removing tax breaks in a capital intensive and competitive business sector that would discourage many oil producers from working here.   More Hyde than Jekyll. To skip to another metaphor, how much of this is the usual smoke and mirrors show?

There are politics and there is reality, and one of the things I’ve learned since this administration has been in office is to take everything they say with a huge grain of salt and wait until you actually see something happening before you believe it.

I’m glad that’s the plan.  But until I see this administration walking the walk, not just talking the talk, I’ll reserve any approbation for that moment.  And then it will be muted given the “policy” the administration has pursued until now.

OK, I’m metaphored out – over to you.

~McQ

Twitter: @McQandO

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Gas prices, economics and politics

Gallup tells us that economic confidence has slumped sharply in the past two week due mainly to the spike in gas prices driven by the unrest in the Middle East and North Africa.

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Funny how that works, no?  Gas prices go up, economic confidence goes down.  And the rest of that goes “economic confidence goes down, incumbents suffer”.

So you’d think smart politicians would want to ensure that they’ve done everything they could to ensure gasoline prices remain as low as possible.

You’d think.   But that’s not exactly what has happened here, is it?  We’re now in the 10th month of a drilling moratorium imposed by this administration, so there’s really no immediate or impending increases in production domestically that could help ease this, is there?

Says Gallup:

The slump in confidence is likely tied to gas prices, which have risen sharply amid growing political instability in the Middle East, most notably in Libya. The U.S. Department of Energy reported an increase in gas prices from an average $3.14 per gallon nationwide during the week ending Feb. 14 to $3.38 this past week. In addition, news media focus on the challenges governments are having in passing budgets may also affect Americans’ perceptions of the economy.

Gallup’s Economic Confidence Index comprises two measures — one assessing consumers’ views of current economic conditions and another measuring their perceptions of whether the economy is getting better or worse. Both components are more negative than they were two weeks ago, but most of the change has come from increasingly pessimistic expectations about the economy’s direction.

The pessimism is being driven by the understanding that we haven’t the means to effect the problem nor have we done anything in the interim to improve our ability to effect the problem.  In other words, we’re more at the mercy of foreign oil now than we were when this administration took office.

Secretary Salazar has been on a vendetta against oil, using the unusual but certainly horrific accident on the Deep Horizon platform, to effectively shut down a critical portion of the domestic oil industry.  It has cost thousands of jobs and billions of dollars (not only to the industry but to the government in the form of royalties and taxes).   Rigs which were scheduled to be deployed in the Gulf before the moratorium are now deploying elsewhere.  It costs millions for companies when oil drilling rigs sit idle.  So they’re off to do what – exploit foreign oil fields.  And they most likely won’t be back in Gulf waters anytime soon.

The point, of course, is the entire energy situation in the US is being badly mishandled by the incumbent administration.  And while they sit and fiddle, we become less and less able to effect world pricing for oil because our capability has been hamstrung by a government and bureaucracy that is basically antagonistic to fossil fuels.

That’s a risk, especially in these economic times.  If the economy is still in this sort of shape, pessimism still holds the majority in consumer confidence and gas prices hang around the $3.50 range, even some of the so-called front runners in the GOP at this point might be able to squeak out a win.  And it would most likely, as Charlie Cook predicts anyway, mean a tough election for Congressional Democrats in both houses.

Gasoline isn’t going to go down anytime soon as the unrest continues to roil the ME and N Africa.  And if something happens in Saudi Arabia, all bets are off.  But it is interesting to see how quickly the price of one commodity – albeit a critical commodity – can turn sunshine to gloom with the public.  It is something to watch going forward.

~McQ

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The energy policy choices

Yesterday was a rather interesting day for me.  Besides being a mild and pleasant day in Washington DC, a new Congress was being sworn in and an vital industry group was making the “state of American energy” known via a presentation and news conference at the Newseum – a museum about the history of gathering of news (and a place you should definitely put on your “must visit” list the next time you’re there).

The American Petroleum Institute’s Jack Gerard made a very sound and clear argument for the development of an energy policy which will best benefit this country and economy.  Backed by a Wood Mackenzie study, the choices seem stark and the best one seems obvious.  As he laid them out, choice one is to continue the policy of limited or no access to domestic drilling areas both on and off-shore and taxation of the industry at an increased percentage in order to generate revenue for government use.   That will certainly generate revenue – no doubt.  But at what real cost to the economy?  That is the question.

Choice two is to open up access and focus on safe and environmentally sound drilling to boost production here in the US.  That, of course, would have the critical side benefit of creating hundreds of thousands of jobs and, by the way, producing more revenue for government than choice one.

The numbers for the two options come from the Wood Mackenzie study as cited in an API press release.

The study calculates that increased access to America’s oil and natural gas reserves could, by 2025, create 530,000 jobs, generate $150 billion in taxes, royalties, and other revenue for the government, and “boost domestic production by four million barrels of oil a day.

The other choice?   Not so good: “Raising taxes on the industry with no increase in access could reduce domestic production by 700,000 barrels of oil equivalent a day (in 2020), sacrifice as many as 170,000 jobs (in 2014), and reduce revenue to the government by billions of dollars annually”

That latter policy choice would reduce our domestic oil production, cost jobs, raise the cost of doing business for the oil and gas industry of which most will be passed along to those who can least afford it.  Plus:

An additional 1.7 million barrels of oil equivalent a day in potential production that is currently of marginal economic feasibility would be at greater risk of not being developed under the modeled tax increase.

So again we see some pretty stark examples of how government enabling an industry would be vastly more beneficial to the economy and its own revenue coffers than would government using regulatory restrictions, denial of access and a straight up scheme of taxation. 

Yet right now we have an administration which is choosing the latter course and is seemingly at war with that industry- an industry that “supports more 9.2 million U.S. jobs and 7.5 percent of the U.S. economy, and, since 2000, has invested nearly $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.”

Does that make sense to you? 

The energy policy choice that enables Americans to increasingly address their own domestic energy needs with good paying jobs and will actually provide more in revenue for the government than taxation alone seems the obvious choice.

So why aren’t we seeing it being made?

~McQ

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