February 28, 2011
Obama Nixes Safe DrillingBy Jeffrey Folks
Interior Secretary Ken Salazar was in Houston this weekend talking with oil executives who are eager to start drilling again in the Gulf of Mexico. That may sound like progress, but after the meeting Salazar said that nothing had changed. He was not ready to approve any new drilling.
Despite everything that energy companies have done to devise advanced containment systems, Salazar is unwilling to issue a single new permit. Systems constructed by the nonprofit Marine Well Containment Company and other entities are now able to handle a flow equal or greater than that experienced during the Deepwater Horizon accident last summer. But that's not enough for Salazar, who stated that even the most advanced systems have "limitations on water depth and barrel-per-day containment capacity."
Well, yes. Any system that could be devised would have limitations on depth and per-barrel capacity. But that's not the point, as Mr. Salazar must know. The question is whether the new systems are able to handle the sorts of accident that might actually take place. Not the worst scenario that someone from the Interior Department could dream up. Combined with safely protocols now in place, the new containment equipment can do just that.
So why no permits for new drilling? It appears that the Obama administration is more interested in kowtowing to environmental donors in advance of the 2012 election than it is in controlling energy prices. Even with a federal court order to decide on new drilling in the Gulf by March 20, the Obama administration remains obdurate.
By refusing to grant a single deep-water permit in the Gulf, Obama has shut down access to one third of America's oil supply. With Libyan oil fields now closed indefinitely and with uncertainty about future production elsewhere in the Middle East, it is a dreadful time to be shutting down America's oil fields as well. Turmoil in Saudi Arabia, Iran, Kuwait, or Iraq would drive the price of oil up above $150 a barrel, at the very least. A prudent policy would be to increase domestic production in light of uncertainty abroad.
Some Americans are already paying $4 a gallon for gas, but this is not just because of what's happening in the Middle East. Government action on Gulf drilling permits would immediately calm the oil markets and bring down prices, even though new production would not come on line for several years. But instead of reducing prices, Obama seems is intent on driving them up.
It's not just the Gulf of Mexico that is off limits. Obama opposes drilling anywhere offshore, including in the rich arctic region which is known to hold billions of barrels of oil reserves.
Just as bad, in his FY2012 budget Obama proposes cutting $4.4 billion of annual tax deductions for oil and gas drilling -- deductions for depreciation and amortization that date back to 1913. Those tax deductions help energy companies pay for exploratory projects that then result in lower energy costs for all Americans. At a time when Obama is throwing away $100 billion on risky alternative energy boondoggles, a number of which have already gone bankrupt, he wants to end those modest tax advantages that actually result in the production of large quantities of new energy. That sort of accounting only makes sense to a politician.
Obama, in fact, is doing everything possible to curtail domestic energy production, and yet he says that "our dependence on foreign oil threatens our national security." If reliance on foreign oil puts America at risk, why not produce more oil at home? New drilling techniques including fracking, horizontal drilling, and deep-water drilling now make it possible to do just that, but Obama opposes all of these.
If the President knows that dependence on foreign oil threatens our national security and that new drilling techniques can increase domestic supplies, why is he intent on destroying our domestic oil and gas industry?
America is going to need new oil and gas production in a big way. In a new report, Charles T. Maxwell, the dean of U.S. energy analysts, has gone on record saying that regardless of what happens in the Middle East, oil prices are going up, way up. In a Barron's interview Maxwell stated that oil prices will hit $300 by 2020. Maxwell arrives at this number by way of a straightforward calculation. By about 2015 global oil production will peak, but demand will continue to increase on a global basis.
That leaves Americans paying $12 a gallon for gas, which is just about what Obama has said he wants. That certainly will help to end our dependence on foreign oil. The problem is there won't be anything to take its place.
At $12 a gallon, we won't be driving around much in large SUVs or in small SUVs, either. Nor will we be enjoying cheap air fares or discounted cruises. The cost of transporting goods will triple, as will the cost of heating homes, schools, and offices. And those who think that solar and wind will take the place of fossil fuels are sadly mistaken.
As Maxwell points out, solar energy now supplies one tenth of one percent of America's energy needs. Even with massive subsidies -- the kind of subsidies that have already bankrupted the Spanish economy -- solar and wind will never supply more than a small percentage of America's energy needs. Since Obama, through EPA restrictions, is busy sabotaging coal and natural gas as well, and since America has no serious nuclear program underway, we are left with nothing.
Only a president who is extraordinarily stupid would fail to see this. Conclusion: Obama is either extraordinarily stupid, or he is willing to trade America's national security for the support of environmentalist donors who are key to his re-election. Whichever it is, we're in trouble.
Jeffrey Folks is the author of many books and article on American culture.