Guest Editorial: Time is right for US to expand OCS access

Posted on 18 March 2013

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Randall Luthi, president of the National Ocean Industries Association

Prices at the pump hit a record high in the US at the beginning of February and are expected to rise through spring. Most pundits claim that rising crude oil prices are to blame. At the same time, government and industry officials report that US oil and natural gas production is up, and they predict that the US is on the verge of becoming an oil exporter. So, what gives? If oil and natural gas production is up to such an extent that we are on the verge of becoming an oil exporter, why are crude oil prices, and gasoline prices at the pump, rising instead of falling?

Those opposed to increased oil and natural gas exploration in the US claim that this paradox is further proof that increasing production does not bring down prices at the pump, reasoning that in a global market, US production has little impact on the price of oil or gasoline. While an interesting argument, I suggest that reasoning is flawed, or in more subtle terms: poppycock! According to Merriam-Webster Online, poppycock is “empty language or writing: NONSENSE.”

That’s pretty strong language, but let me lay out my reasoning. Gasoline prices are greatly influenced by supply and demand. Unrest in the Middle East, potential disruption of the Straits of Hormuz and threats to open up the Strategic Petroleum Reserve apparently all influence crude oil and gasoline prices. But these factors have a common denominator: They all directly impact the amount or supply of crude oil in the global market. Thus, shouldn’t increased production anywhere have an impact on the price of crude oil, as well?

As we have seen, just the promise of future increased production can have an effect. In 2008, when gasoline prices first hit the unthinkable benchmark of $4 per gallon, Congress and the president promptly either removed or let expire decades-long prohibitions on exploration on 85% of the US outer continental shelf (OCS). And we saw both crude and gasoline prices begin to decline. Yet the federal government has yet to allow any exploration, let alone development of oil and natural gas, in the 85% that was opened up nearly five years ago. The time is right to do so now. The Obama Administration’s spirited push to promote wind development on much of the OCS should have been combined with increased access to oil and natural gas resources there, as well. They lost a golden opportunity to promote a truly “all the above energy strategy” by failing to open up any new areas in their 2012-17 OCS oil and gas leasing plan. As a result, the oil and gas industry is being constrained to look in the same areas they have looked for more than a generation.

But there is still hope that this missed opportunity may be rectified. Members of Congress are currently considering legislative measures that would increase the amount of money coastal states receive from energy production off their coasts. Such measures should move forward coupled with increased access to federal offshore areas in the Eastern Gulf of Mexico, the mid- and South Atlantic and possibly off the coast of California.

The benefits of increased production are not only additional revenue to the coastal states. A recent study authored by Joseph R. Mason of Louisiana State University indicated that opening up the Atlantic, Eastern Gulf and the Pacific offshore areas could generate more than $141 billion in increased economic activity, create approximately 625,000 additional jobs, and provide more than $35 million in additional revenue annually to states and $85 million in added revenue annually to the federal government.

The oil and natural gas industry has been a leader in job security and growth in the US for the past two years. Increased access to offshore areas will enable more oil and natural gas production, which will spur more job creation, generate more revenue to states and the federal government, provide more energy security and reliability, and yes, help us reach that prediction of becoming an oil exporter.

Other countries, such as Brazil, Angola, Norway and even Iceland, recognize the importance of developing their offshore oil and natural gas resources. We should as well. That’s not poppycock!

Randall Luthi is president of the National Ocean Industries Association, representing more than 275 companies engaged in all aspects of the exploration and production of both traditional and renewable energy resources on the US outer continental shelf.

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