Tuesday, June 15, 2010

We’re from the government and we’re here to help. Or not!

Commentary by James H. Shott


Nearly two months after BP’s Deepwater Horizon explosion killed 11 workers and started spewing oil into the Gulf of Mexico, little has been done to slow the flow of oil from the seabed and less has been done to clean up the oil in Gulf waters and on beaches. People are angry, and rightly so.

Making decisions when you are angry usually produces bad decisions, and this situation proves the rule. Many questions are only partially answered and some not answered at all, and there’s no reason to have rushed to judgment. What we should have done is rush to the assistance of the people of Gulf Coast states. But instead, Washington sat on its hands, telling us “we were there from day one.”

The Dutch government offered its help and was rejected, and a number of creative ways of extracting the oil in the water have been suggested, but they have been ignored, lost in the bureaucracy, or couldn’t break through the blame-focused attitude of the Obama administration. The president should take a deep breath and change his focus from blaming and butt-kicking to actually doing something to help the people of Gulf Coast states. In other words, stop talking and do something!

Banning off shore drilling and boycotting BP are two popular actions favored by a large number of Americans. Such ideas appeal to the opportunist, or to people overcome with emotion who want to shoot first and ask questions later. Boycotts are sometimes effective tools to make a point. Often, however, they are ill-advised and, frankly, dumb. Boycotting BP stations falls squarely into the latter category. It’s like kicking the dog when your kid wrecked the car. Our friends, neighbors and acquaintances that own and work in these businesses are not to blame for the problems in the Gulf, so don’t punish them. And driving the company out of business would be counter-productive.

President Barack Obama’s rash decision to stop all drilling in the Gulf and other off shore locations presents more serious problems. The president wants to insure there isn’t another accident like this, but he should know that as bad as this one is, it’s the first significant deep water accident in 40 years. He over-reacted.

Jack Gerard, president of the American Petroleum Institute (API) told Congress that raising the Oil Spill Liability Trust Fund cap from $75 million to $10 billion, as proposed by US Senate legislation, would jeopardize about 145,000 jobs. Further, Mr. Gerard said that raising the cap could raise costs for offshore operations. "The impacts would be devastating ... just a 10 percent increase in development costs could … [result in] reducing production, jobs, and put $7.6 billion in future government revenue at risk," he said.

API’s chief economist Dr. John Felmy predicts that the short-term implications of a drilling moratorium will easily affect thousands of jobs in the Gulf region. Each drilling platform has 100 to 200 people on it, he said, and there are up to 30 platforms in the Gulf. That means as many as 6,000 direct jobs will be lost, and Dr. Felmy says two to three times that many support jobs are also at risk.

If the Obama administration wanted a strategy to virtually destroy the economy of Gulf Coast states, it would be hard pressed to find one more effective than banning oil and natural gas drilling there.

And according to Dr. Felmy, longer term bans on drilling will have a substantial impact on domestic oil production, and that translates to higher prices and perhaps shortages of gasoline and other fuels.

API explains that about 30 percent of the nation’s total domestic oil production and 13 percent of domestic natural gas production comes from the Gulf of Mexico and that deepwater development produces approximately 80 percent of the oil and 45 percent of the natural gas in the Gulf.

The extremists among the drilling-ban crowd would be happy to see fossil fuel use end abruptly, but have given no thought to how we would deal with the chaos that would ensue. These ideologues couldn’t care less how many families are ruined by such actions.

However, the reality of the energy situation is that oil and natural gas are going to be essential to the US energy picture for decades to come because alternative energy sources are insufficiently developed to take up the slack.

But aside from energy, let’s not forget that petroleum is the basis of a vast array of products besides fuels and lubricants. Ranken Energy Corporation explains that one 42-gallon barrel of oil creates 19.4 gallons of gasoline, but more than half of it is used to make things like plastics, asphalt, waxes, golf balls, toothpaste, panty hose, contact lenses, lipstick, nail polish, insect repellant, hand lotion, antifreeze, heart valves, parachutes … approximately 6,000 individual products.

So put the ideology on hold, accept the fact that we need oil and we need more domestic oil, and let’s focus on fixing the problems this tragic explosion has caused, finding wrong-doing and compensating those who deserve compensation. But let’s pass on the opportunity to use this crisis to advance political and ideological goals.

Cross-posted from Observations

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