It’s funny how things work out sometimes. Consider the sensitive issue of offshore drilling for oil in the Gulf of Mexico. Five years ago, when the Deepwater Horizon disaster wreaked its havoc on the region, killing 11 workers and ultimately spewing between 4 and 5 million barrels of crude oil into the Gulf, some folks actually wondered if that was the end of offshore oil production. After all, the environmental carnage caused by BP’s negligence seemed far too great to risk another accident of the same magnitude.
And for a brief time, the Obama administration did indeed halt drilling in the Outer Continental Shelf — for all of six months. Federal regulators inspected all the rigs, and when the brief moratorium was over, the Interior Department went right back to issuing new leases for drilling as if nothing had happened — even while waves of tar balls continued to assault the beaches and shrimpers kept coming back to port with empty nets. Today, there’s more deep-water drilling taking place in the Gulf than when the BP rig exploded in 2010.
But the Obama administration’s anything-goes approach to oil drilling — which led to this month’s horrific decision to approve offshore exploration in the dangerous environment of the Arctic Ocean off Alaska — has had some unexpected consequences. In achieving its goal of increasing American oil production, no matter what the risks, U.S. policy as well as steady or increased production overseas has led to a glut in the market for crude. The price has now plunged to levels beyond anyone’s imagination, close to $40 a barrel.
This week, the Interior Department held yet another auction of offshore drilling rights in the Gulf. Needless to say, there was very little excitement:
HOUSTON — With oil prices collapsing and companies in retrenchment, a federal auction in the Gulf of Mexico on Wednesday attracted the lowest interest from producers since 1986.
It was the clearest sign yet that the fortunes of oil companies are skidding so fast that they now need to cut back on plans for production well into the future. The auction, for drilling leases, attracted a scant $22.7 million in sales from five companies, but energy analysts said that came as no surprise on a day when the American oil benchmark price plummeted by more than 4 percent. For the first time since the recession, it is approaching the symbolic $40-a-barrel level. Last summer, it was above $100 a barrel.
A glut on American and world markets is to blame for the depressed prices, but the unusually large daily decline occurred after the Energy Department, in a report, lowered its oil price projections and showed a considerable increase in inventories.
Until now, most companies have insisted that they would not sacrifice production in future years when they said oil prices were sure to rebound strongly. But in recent weeks, executives have expressed concern that the oil price collapse could last through 2016 and even 2017, and it is important that they tighten their belts even more.
What’s interesting is that many folks in Louisiana had found the timing of this auction offensive — coming so close as it did to the 10th anniversary of Hurricane Katrina. That event — which initially threatened the offshore rigs, then brought lethal flooding to New Orleans, made worse by the state’s ever-eroding wetlands — was a painful reminder of the fragility of the Gulf environment.
Now, in a remarkable irony, the oil glut that was unleashed by bad policy has given America time to better re-think its policies on energy. This is no longer a moment for an all-of-the-above energy policy. Instead, the slowdown in oil exploration makes this the perfect time to accelerate the push for safe, renewable sources of energy. Let’s seize this unexpected opportunity.
Read more about the lack of interest in offshore Gulf drilling leases from the New York Times: http://www.nytimes.com/2015/08/20/business/oil-drillers-sit-on-hands-at-auction-for-leases.html?ref=energy-environment
Read more about the risks of offshore drilling in the Gulf in my new book, Crude Justice: How I Fought Big Oil and Won, and What You Should Know About the New Environmental Attack on America: http://shop.benbellabooks.com/crude-justice
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