In Case You Wondered Why the Price at the Pump is Going Up
I see a bad moon a-rising….
PowerLine: In any other administration, Obama’s energy policies would be dominating the political debate. It is only because the administration has pursued so many disastrous policies–government medicine, bailouts, faux stimulus, unheard-of deficits–that energy has taken a back seat. It will not be long, however, before rising energy costs are again in the forefront of economic anxiety and political debate. Reuters reports:
Oil rose on Wednesday after production shutdowns, falling U.S. inventories and growing demand sent Brent crude toward $100 a barrel for the first time since 2008.
U.S. government data showing U.S. crude stocks falling for a sixth straight week helped extend this week’s gains. Disruptions from Alaska and Norway stoked supply concerns and cold weather in the U.S. Northeast fed demand for heating oil. [EIA/S]
Oil’s climb back toward $100 a barrel — last touched in October 2008 — has raised concerns about the impact of higher fuel costs on the tenuous economic recovery. “Back in 2008, (U.S.) crude oil only traded above $100 a barrel for about six months before the world economy collapsed into the worst crisis since the 1930s,” warned Sabine Schels, commodity strategist for Merrill Lynch.
Crude’s rise on Wednesday was part of wider gains across commodities, with metals rising and soybean and corn futures touching 30-month highs that further stoked economic worries. London Brent oil LCOc1, benchmark for European, Middle East, and African crudes, rose 51 cents to settle at $98.12 a barrel, after touching $98.85 a barrel earlier, the highest level since Oct. 1, 2008.
The Obama administration’s announcement that permitting for deepwater drilling in the Gulf will “likely” resume in June is way too little, way too late, and basically amounts to kicking the can even farther down the road.
More than two months after the Obama administration lifted its ban on drilling in the deep-water Gulf of Mexico, oil companies are still waiting for approval to drill the first new oil well there. Experts now expect the wait to continue until the second half of 2011, and perhaps into 2012.
The administration says it is simply trying to enforce new safety rules adopted in the wake of the April 20 explosion of the Deepwater Horizon drilling rig, which killed 11 workers and set off the worst offshore oil spill in U.S. history. Environmental groups say the administration is right to take its time because the Gulf disaster exposed the risks of offshore drilling.
But the delay is hurting big oil companies such as Chevron Corp. and Royal Dutch Shell PLC, which have billions of dollars in investments tied up in Gulf projects that are on hold and are paying hundreds of thousands of dollars a day for rigs that aren’t allowed to drill. Smaller operators such as ATP Oil & Gas Corp., which have less flexibility to focus on projects in other regions, have been even harder hit.
The impact of the delays goes beyond the oil industry. The Gulf coast economy has been hit hard by the slowdown in drilling activity, especially because the oil spill also hurt the region’s fishing and tourism industries. The Obama administration in September estimated that 8,000 to 12,000 workers could lose their jobs temporarily as a result of the moratorium; some independent estimates have been much higher.
I’m starting to see $3.00 signs all around my town. Pretty scary.
UPDATE: This no-drilling-anywhere-on-planet-earth policy is costing the feds billions in lost revenue.
Production in the Gulf of Mexico — which normally accounts for about 30 percent of all U.S. production — is expected to drop this year by 220,000 barrels per day, according to projections from the U.S. Energy Information Administration.
With oil currently at $90 a barrel and the royalty rate at 18.75 percent, that equals $3.7 million in lost revenue each day.
If the agency projections hold over the course of the year, the federal government would lose more than $1.35 billion from Gulf royalty payments this year.
The number grows even larger when coupled with a lack of Gulf lease sales and fewer rental payments. Those three components — royalties, leases and rent — make up a sizeable amount of government revenue.
The looming shortfall is raising red flags on Capitol Hill. Sen. David Vitter, R-LA, an outspoken critic of the Obama administration’s drilling moratorium and the subsequent slowdown in permitting, first called attention to it in September.
“It’s not only about job loss along the Gulf Coast — the federal government is losing revenue as a result of the administration’s misguided moratorium,” Vitter explained.
“I’ve been attacking the moratorium from multiple angles and will continue to do so until drilling can fully resume.”
Yeah, good luck with that…
via Weasel Zippers.