Well, you’ve seen the president taking all the credit for something that happened in spite of his policies. We just recently reported how Obama is working to block any access to the Alaska National Wildlife Reserve (ANWR) for oil exploration by declaring it a wilderness.
Of course we all know very well the exploits of the EPA to usurp more private lands under various purported guises of protecting the environment. And what has to be of great concern to any American who comprehends our fragile and anemic economic recovery — 2.5 percent annual GDP growth can’t be considered the new normal — is that the minuscule economic growth we have seen is based on the boom in the oil and natural gas industry. So what if that comes crashing down?
As CBS News Money Watch says, ” A new report by the global information and analytics firm IHS (IHS) suggests the historic gains in U.S. oil production may end abruptly by the middle of this year.”
IHS bases its report on a study of 39,000 oil wells. It concludes that if prices for benchmark West Texas Intermediate (WTI) crude oil remain below $60 per barrel, month-to-month U.S. oil production could come to a halt in several months’ time. As of Tuesday, WTI was hovering well off its recent lows, at around $53 per barrel. Global oil prices have lost about half their value since last June, thanks in part to production of shale oil and tar sands from fields in the U.S. and Canada. And while that’s been great news for consumers, especially when it comes to gasoline prices, it’s bitten hard into the profits and operating budgets of U.S. oil producers and other companies that rely on oil production.”
So what does this truly mean? Well if you’ve been out to the Permian Basin area of West Texas you’ll notice the second and third order economic benefits of oil production in Midland, Texas and Carlsbad, New Mexico. If you travel to Cushing, Oklahoma you’ll also see the economic growth and increase in the quality of life. But if oil production and exploration companies are forced to shut down operations, you’ll see a spike in unemployment.
Consider the tiered effects of the oil boon crash. Instead of pressing on to produce, consume, and export oil and natural gas energy resources, for some reason we are responding the way “somebody” wanted. Saudi Arabia can afford the price per barrel of oil to go as low as $25 because their production costs are so low.
So maybe the Saudis are letting prices tumble as a way to punish competitors — Iran comes to mind first. But it’s also adversely affecting Russia, Nigeria, Venezuela, and of course, America.
Now, how many of you out there remember the Saudi oil crisis during the Jimmy Carter administration and the odd/even day rationing? We won’t get to that point, but we could see our tenuous economic gains squashed.
“Speaking during a conference call BP CEO Bob Dudley said the current situation “reminds me a little bit of (the oil price collapse in) 1986 in terms of the potential for this to be an extended downturn.” I think any time the price of oil drops 60 percent it’s not a correction,” he added, “it’s something different.”
“U.S. oil production has been the main engine of global supply growth in recent years,” Jim Burkhard, an IHS vice president, said in a statement. “And momentum from strong growth in the second half of 2014 means the impact of lower prices will not immediately drive production lower. But the reality of lower oil prices and less spending on new wells will affect production as 2015 progresses.”
So if I were sitting at 1600 Pennsylvania Avenue, here’s what I’d do.
1. I’d suggest we drill, open up more lands and areas, complete the northern portion of the Keystone XL Pipeline, and build more refineries.
2. Begin negotiations with partnering nations to supply them with oil, natural gas, and coal energy resources.
3. Make sure we have at minimum a 20 percent overage of our own strategic energy reserves.
4. Figure out the appropriate level of oil production to maintain average U.S. gasoline prices between $1.80 and $2.00 per gallon.
5. Assess how and where we could build more nuclear power plants and would cut back on the Department of Energy in order to fund the building of those plants.
6. Encourage a national movement to make every method of mass transit in America run on natural gas.
7. I wouldn’t pay attention to the OPEC nations and what they’re attempting to do by manipulating the market. It would in effect be an Energy War, part of our energy security which is the linchpin between our economic and national security.
Unfortunately I don’t think the current presidential administration has a strategic plan — heck, they’re captives to Tom Steyer and the rest of the radical environmental lobby. If we do indeed face a potential oil crash in mid-2015, it will be interesting to see if President Obama takes responsibility, or just blames someone else.
Something tells me it will be the latter.