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All Da King's Men

Gas Pains - Part II

By Da King Published: April 28, 2011

Last month, President Obama attempted to blame the oil companies for not doing more drilling and exploration in America, as follows:

There is more we can do, however. For example, right now, the (oil) industry holds leases on tens of millions of acres — both offshore and on land — where they aren’t producing a thing. So I’ve directed the Interior Department to determine just how many of these leases are going undeveloped and report back to me within two weeks so that we can encourage companies to develop the leases they hold and produce American energy. People deserve to know that the energy they depend on is being developed in a timely manner.

This striles me as a bizarre statement. Obama is more or less saying that American oil companies aren't interested in making more profits by doing more drilling. I find that pretty hard to swallow. If I'm not mistaken, oil companies are in business to drill for oil. Why would they NOT do it ? Could Obama be correct ???

Actually, Obama is technically correct. The oil industry does hold leases on lots of land that isn't producing oil, but Obama's remarks are still entirely misleading. Either Obama doesn't understand how oil exploration works, or he's engaging in his typical blame-shifting partisan behavior. Here's an explanation from the oil industry:

“The process of looking at an area that might have oil and gas potential and narrowing your search over time and over a sequence of steps to actually producing oil and gas involves kind of casting a big net first and over time through geologic work,” Ranger said. “You prioritize some over others, you may be lucky on those first ones you drill, you may not — then you drill prospects further down your priority list.”

Ranger also explained it’s not always a cut-and-dried situation. Some areas will have oil and gas, some won’t and some might have it, but it may not be economically feasible to pump it out of the ground.

“When you drill, you have results that are either sufficient oil or gas to allow production or a dry hole or somewhere in between where you think we may have production but we may need some further work to determine whether this formation, this target, is economic to produce. Those steps consume several years from the point of leasing to a point of decision.”

Just because the oil industry holds leases on land, it doesn't mean that land holds big oil deposits, and even if it does, oil exploration isn't cut and dried. It takes time to develop those deposits. The idea that Obama's Interior Department is going to make a determination on the oil-worthiness of tens of millions of acres of leased land in two weeks just because Obama ordered them to is ludicrous.

This leads me to another Obama proposal. The President has called for an end to the $4 billion in subsidies for oil companies:

The president, in a letter to congressional leaders, said that “our outdated tax laws” have provided the oil and gas industry more than $4 billion per year in subsidies “even though oil prices are high and the industry is projected to report outsized profits this quarter.”

“We simply can’t afford these wasteful subsidies,” he said.

Even though Obama always refers to these oil "subsidies", they are actually tax breaks oil companies get to do OIL EXPLORATION AND PRODUCTION, which I thought Obama was trying to encourage. Personally, I'm fine with ending oil subsid..., I mean, tax breaks, but that ain't exactly going to bring the price of gas down. If anything, it will cause it to increase a bit. And don't believe for a second that Obama wants to use that $4 billion in savings to reduce the deficit. No sir. Obama wants to take the oil company "subsidies" and use that money to subsidize other energy sources:

President Obama urged Congress Tuesday to end “unwarranted” tax breaks to big oil and gas companies and to invest the savings in alternative-energy sources.

Notice how when the President likes a subsidy, it suddenly morphs into an "investment". Obama loves the word "invest" when it suits him. Obama would take the oil company "subsidies" and use it to "invest" in wind and solar energy.

The fact is, the government subsidizes just about every energy source we have. I'd be fine with stopping that completely, but it's not going to happen. Democrats and Republicans won't let it.

Now let's take a look at which energy subsidies are the most efficient. The following chart is from Reason TV:

As you can see, we get a lot more energy bang for our buck from oil. If the President wants to talk about "wasteful subsidies", well, wind and solar are the most wasteful, by far. But that's where he wants to subsidize, er, I mean, "invest". It doesn't quite add up to me.

While I'm on the subject of subsidizing oil, let's not forget that Obama loaned $2 billion to Brazil to finance that country's oil exploration, leaving Americans to wonder why we are financing another country's oil instead of our own. Good question.

The White House, Republicans, and the American Petroleum Institue are all arguing over statistics on oil production. Obama is claiming that he ramped up oil production, but the other two groups are disputing that claim:

Obama administration officials have been pointing to a jump in domestic oil production and federal lands leased for development to beat back claims that it has slowed offshore work in the wake of last year’s Gulf oil spill.

But the administration is unfairly taking credit for long-term decisions that were made long before President Barack Obama took office, said Erik Milito, upstream director for the American Petroleum Institute.

“It’s completely disingenuous to say that offshore production has increased due to anything this administration has done,” Milito said. An increase in public land leased for oil and gas development is “attributable to these decisions to lease almost a decade ago.”

Milito also took aim at Interior Secretary Ken Salazar’s claim before the House Natural Resources Committee that there were 126 drilling rigs in the Gulf of Mexico last month, compared to 120 in February 2010 and 116 in 2009.

Rig counts may have gone up, Milito said, but that doesn’t mean they’re working.

According to rig counts provided by Baker Hughes, there were 55 rotary rigs drilling offshore in the Gulf of Mexico four days before the Deepwater Horizon explosion last April. Last week, that number of working rotary rigs in the Gulf had dropped to 25.

Oil industry leaders have consistently accused the administration of throwing up roadblocks to new production, even before the Gulf of Mexico spill. Milito said there has been “decision after decision that shows they are not trying to promote oil and gas as part of the U.S. energy (portfolio and policy) going forward.”

Last week, Salazar told the natural resources panel that the government has expanded the amount of public lands and federal waters available for oil and gas production, even as U.S. imports of foreign oil have decreased. Analysts have attributed the drop in imported oil to a decrease in U.S. oil demand because of the economic recession.

A White House blog post earlier this week highlights the jump in oil production from the outer continental shelf over the last two years, from 446 million barrels in 2008 to 600 million barrels of estimated production in 2010.

Staff for Republicans on the House Natural Resources Committee sent a “fact check” style e-mail to reporters accusing the administration of “attempting to take credit for actions they had nothing to do with.” Instead, the Republican staff said, “the strong production in the Gulf was due to leases issued in 1996-2000 under the Deepwater Royalty Relief Act — long before Obama took office.”

They noted that the government’s Energy Information Administration projects a slight decline — of about 150 million barrels — from the Gulf of Mexico in 2012, in part because of last year’s five-month ban on some deep-water exploration.

The squabbling over statistics shows no sign of abating. The administration has prepared a fact sheet on oil and gas development laden with stats touting increases in domestic production and flagging the amount of onshore and offshore leases that aren’t producing. For instance, though 41 million acres of public lands now are leased for oil and gas development, just 12 million acres are producing.

This President loves to take credit for things he didn't really do, but I guess Obama at least gets credit for not killing the pre-existing oil leases, other than in the Gulf Of Mexico, where he did kill them. In the Gulf, Obama has even defied a court order to lift the moratorium, and former Presidents Bush and Clinton are both criticizing Obama for delaying oil production.

As they say...DRILL BABY DRILL. We should have been doing it all along. Liberals were very contemptuous of that phrase, but as usual, liberals were wrong. I dont know why anyone would listen to them anyway. They are the ones who have stifled energy production in this country for the last 35 years. Look where that has gotten us, more dependent and less secure.



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