Slow-Rolling The American Public

It's been my impression that the administration has been touting its pro-oil stance in light of $4.00 gasoline. My world view is quite the opposite. This is why:


http://video.cnbc.com/gallery/?video=3000085551&play=1
Link to Rigzone.com: slower Gulf of Mexico permitting --> reduced production

Federal Offshore GOM field production averaged 1.3 million barrels per day (MMbopd) during calendar year 2011, a decline of 15 percent compared to 2010 levels. A reporting lag exists in providing federal production data. Thus, the most recent monthly data available is January 2012. In this most recent month, field production improved 1 percent to 1,326,000 barrels per day (bpd) versus 2011's average.

However, current production levels are well below recent peak levels of 1.7 million bpd set in February 2010.

Prior to the Macondo spill, the MMS was averaging 26 days to approve a "New Well" permit when drilling was conducted in shallow waters. For deepwater projects, the span was 16 days.

Today, BSEE takes 67 days to approve a shallow water well and 70 days for a deepwater well.

Thus, common sense would suggest that crude production in federal offshore waters is on a very slow trajectory toward returning to Pre-Macondo levels.

An interesting analogy flashes across my mind as I format the above. Consider the largest Mexican off-shore oil field. Link to the Economist, hardly a right-wing rag.

As recently as 2004 Cantarell, the country’s main offshore field, produced 2.1m barrels per day (b/d) of crude. Now its output is just 600,000 b/d. There are no obvious replacements: 23 of the 32 biggest fields are in decline. Barring big new finds, the world’s seventh-largest oil producer is forecast to become a net importer by 2017.

There is no mystery behind the decline. The constitution bans private investment in hydrocarbons. The Economist: blame the politicians.

Speaking of politicians, I see that a Democratic Senator from West Virginia will not campaign for, nor will vote for President Obama in the next election. He does not say it so clearly, but he has certainly telegraphed his intentions. And no wonder. The president has created the perfect storm for the coal industry. Three data points:

• President Obama is on record (and on YouTube) committed to destroying the coal industry
• coal shipments are down; EPA has regulatory power to not only stop coal mining, but coal transport
• natural gas prices are at record lows

This is the irony. My hunch is that faux environmentalists never wanted to kill the coal industry. Their hope was to use the issue (cap and trade) to transfer huge amounts of wealth from the coal industry to government spending programs. The faux environmentalists never anticipated the free fall in the price of coal. The coal industry would be in a world of hurt without the president's commitment to destroy the industry and without the EPA's commitment to do the same, but with natural gas prices where they are, it's a given. So, all that "cap and trade" transfer of wealth has been taken off the table. Boohoo. 

For the moment, we've seen a leveling off in the decline of coal usage in the United States, but that's because the utilities that have been able to convert coal plants to natural gas plants have already done so. New natural gas plants will take time and money (and regulatory approval). But the writing is on the wall. There will be no coal-usage growth in the US while natural gas is priced at $2.00. Once the EPA is successful in banning coal transport, the president's goal to kill the industry will have been achieved.

When a Democratic senator from a coal state telegraphs he won't be supporting the president in the election, one knows that the folks in the trenches (or in the mines, as it were) are acutely aware of their future.