Late last year, John Hofmeister, former President of Shell Oil, predicted that the U.S. would face a 1970′s style shortage and rationing by the end of the decade, while J.P. Morgan Chase & Co predicted oil would hit $120 a barrel by the end of 2012.
According to Hofmeister, the problem won’t happen suddenly. Problems would start with “stockouts” at selected gas stations during summer and bad weather and then spread. States farthest from refineries would get hit the worst and then states might have to resort to rationing.
The Interior Department announced late last year that it would not pursue any new drilling off the East Coast or in the Gulf of Mexico for at least 7 years. While clamping down on domestic energy production, Obama has
invested wasted billions in renewable energy sources. Domestic oil production has dropped from about 10 million barrels at day a few decades ago to around 5 million barrels today. The lack of new drilling and expansion of existing oil fields has finally come home to roost.
In an attempt to appease potential voters, a five year offshore drilling plan was released on Tuesday. The plan calls for opening up the Beaufort and Chukchi seas and the Cook Inlet off Alaska as well as a few more areas in the Gulf. The Interior Department’s proposed “Outer Continental Shelf Oil and Gas Leasing Program” for 2012-2017 would open up more than 75% of potential resources through 15 lease sales in six offshore areas. By expanding drilling off the coast of Alaska and in the Gulf, Obama is trying to strike a delicate balance so as not to anger environmentalists and drilling opponents. Erik Milito at the American Petroleum Institute said that they plan is a good first step but too limited. “This is a missed opportunity to open additional areas that could help address rising energy demand, create American jobs and reduce the federal deficit.” Drilling in new areas can only happen after the completion of geologic studies, environmental impact studies, court challenges and public lease sales. It will years before any new drilling will occur. Obama’s actions are too little and too late to help our economic and job situation.
With high unemployment and little economic growth, oil prices continue to climb. While demand in the U.S. has dropped, countries like China and India continue to grow their economies and demand for more oil. Americans are on pace to spend a record 4489.7 billion on gasoline in 2011, which is $100 billion more than they spent in 2010. Van der Valk, an independent fuel consultant says that West Texas Intermediate crude “will be in the $110 a barrel range next year. “We started high on gasoline prices this year and we stayed high, and we are going to go higher next year. We could be as high as $4.50 a gallon in California by Easter. The rest of the country will be above $4.00 a gallon by then.
The primary reason for high prices is the growing demand, not only in China and India, but in Latin and South America, which is driving record U.S. exports to those areas of the world, particularly in the form of diesel. U.S. refiners are making more diesel at the expense of gasoline production.
Higher gas prices means higher food, consumer goods and utility prices. Over the last year we’ve watched gas and energy prices soar while employment numbers dwindled. A return to previous permitting levels and a clearer regulatory environment has the potential to unlock hundreds of thousands of jobs and billions in revenue. Lets tell Obama and Congress we’re fed up! Sign the “Open the Gulf ” petition.
If the price of oil isn’t hard enough to swallow, Interior Secretary, Ken Salazar, signed “Secretarial Order 3315″ that will consolidate the Office of Surface Mining Reclamation and Enforcement (OSM) with the Bureau of Land Management (BLM). The order states that “fee collections” and “regulation, inspection and enforcement, and state program oversight” will now be integrated. This new order is in direct contradiction to the 2010 SO 3299 which raises serious questions as to the real purpose of the agency reorganization, especially since it impacts coal.
Doc Hastings, R-WA, Chairman of the House Natural Resources Committee said “I have serious concerns about this Secretarial Order to suddenly and dramatically alter the management of coal mining and the multiple use of Western BLM lands. The Obama Administration has not made secret its desire to put an end to America’s coal mining industry, and this appears to be one more step in that direction.”
In an internal memo to the Department of Interior, Salazar said “This integration reflects our ongoing commitment to good government” and claims that it is about “doing more in a limited budget environment.”
Industry sources fear that OSM will be lost inside the BLM and view the move as a way to make coal mining more difficult, to delay permitting. Normally a permit can be permitted through OSM in less than a year. Permitting of a hard rock mine through the BLM can take 7-10 years.
Last year’s SO 3310 circumvented Congress’ unique ability to designate Wilderness Areas by creating a new “Wild Lands” designation and BLM deals with federal lands in the west.
While some industry groups are taking a wait and see approach, “the longer there is silence, the harder it will be to reverse the order which is scheduled to become effective December 1, 2011, following consultation with applicable congressional committees and will remain in effect until “amended, superseded, or revoked, whichever occurs first.”
This is just another power grab designated to take away authority from the states and move it to the federal government – meaning more centralized power. We need to stop SO 3315 before it starts. Contact your representatives now – time is of the essence.