What do I reference? The new Obama ban on offshore drilling.
A May 28 USA Today report explained it this way:
The Obama administration on Thursday extended that ban for six months for new drilling in depths greater than 500 feet. It halted work on all 33 deep-water exploratory wells in the Gulf pending investigations into the spill. It also suspended, until at least 2011, Shell's plans to drill five wells in the Arctic this summer. And it canceled several planned lease sales for new oil and gas exploration off the coast of Virginia and in the western Gulf.
Interior Secretary Ken Salazar also said new safety measures would be required for the industry, including certification of equipment meant to prevent well blowouts, tougher inspections of deep-water operations and more requirements around key steps in well drilling.
Salazar said the pause on some drilling is needed to prevent a repeat of the BP oil spill — which has resulted in the nation's largest-ever oil spill response. The American Petroleum Institute calls the delays on new wells very stringent, given that thousands of oil and gas platforms are operating safely in the Gulf and have been for years.
The delays "are of great concern to the industry," says Rayola Dougher, senior economic adviser to API. They'll not only cost producers time and money but will cost jobs in the already devastated Gulf Coast region, she says.
Chevon, in a statement, said halting deep-water drilling, even temporarily, would "have lasting energy security and negative economic consequences" for the country. It said "responsible drilling" should be allowed to continue.
The Gulf accounts for 30% of the USA's domestic oil production. Existing production won't be affected by the president's initiatives, nor will exploration in shallow waters.
The restrictions won't boost consumer gas prices in the short term because there's currently excess oil production globally, says Robert Peterson, industry consultant with Charles River Associates. The delays in drilling today will, instead, affect production years from now.
The Obama decision is more about political posturing, and it creates additional uncertainty about where domestic energy exploration and production is headed. Add it onto the costs and diminished incentives to invest in and undertake exploration and development that would come with a cap-and-trade regulatory regime, and when we face continued and expanded energy woes down the road, keep in mind that the Obama agenda deserves a great deal of blame.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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