If you’re not confused about what President Barack Obama’s administration and the Republican opposition are actually doing for the oil and gas industry, then you probably quit reading the news.
Obama is pushing an “all-of-the-above” energy strategy – not to be confused with an energy policy. He keeps telling the industry that he is firmly on the side of expanding exploration and production in the U.S. Then, the Democrats introduce legislation to eliminate tax incentives for the industry, which the Senate votes down.
The Department of the Interior (DOI) tells us that there will be more federal lease sales offshore. But, those lease sales are in areas where the oil industry has been operating for years – the Gulf of Mexico and Cook Inlet.
There will be a seismic survey done off the East Coast to check to see if there are any likely places to find oil and gas in preparation for an offshore lease sale. However, states like Virginia and North Carolina are pleading for those lease sales because the governors in those states know what a difference the oil industry makes when it comes to creating jobs.
Of course, the Democrats and Republicans have been fighting over the Keystone XL Pipeline from Canada to no avail. The best thing to come out of those arguments is the impetus for building a pipeline from Cushing, OK, to the U.S. Gulf Coast. That makes sense and has been needed for quite some time. That is sure to doom the project.
Now, the DOI has a new idea – speed up the review of applications to drill on federal land. DOI Sec. Ken Salazar introduced the plans during a dog-and-pony show in North Dakota – where the majority of the state’s move up to the No. 3 oil producer in the U.S. was done on private land, not federal land.
Called the National Oil and Gas Lease Sale System, it is another idea that makes sense. Unfortunately, the “automated tracking system” won’t be ready to go until May 2013, according to the Bureau of Land Management. Like most of this administration’s good ideas, this one received a less-than-enthusiastic response from the industry.
We are told all of this rhetoric is aimed at lowering the price at the pump for gasoline. Now, if the Texas Railroad Commission was still setting the price of oil that might be an option. The commission is not. World markets set those prices, and the U.S. appetite for foreign crude oil makes sure that the country remains at the effect of high world oil prices.
Both the Democrats and Republicans say they are out to bring pump prices into line. If that is the case, it would seem that a few compromises along the way could have an impact on the domestic industry.
You can see the companies are willing and able to boost U.S. oil and gas production. After all, the price of natural gas is going through the floor because of just how good those companies are.
But, that doesn’t make the task any easier. The lowest natural gas prices in the last 10 years should be boosting U.S. manufacturing, which in turn would increase demand and prices. Getting U.S. manufacturing competitive again should be where the administration and Congress are placing their emphasis, rather than castigating the oil industry.
On April 4, Apache Corp. and Energy Partners Ltd. announced the companies were abandoning a project in the Gulf of Mexico that was focused on exploring for natural gas. The low price for natural gas was the reason given by both companies for dropping the project.
In the wake of continued low prices and demand, U.S. and Canadian companies are shutting down natural gas operations to shift to oil and natural-gas-liquids plays.
Rather than responding to increased demand, the industry is forced to reduce supply.
Congress and the administration are about to get another lesson in petroleum product pricing. It’s a lesson they won’t like.
Contact the author, Scott Weeden, at email@example.com.
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