Everyone and his brother has an opinion about what should be done in the wake of the Deepwater Horizon blowout in the Gulf of Mexico, but the only opinion that really matters is the one in the White House. President Obama has taken stock of the environmental consequences of the leaking oil from the Macondo well and has determined that to avert another accident, there will be no deepwater exploration drilling in the GoM for another five months. While supporters of renewable energy are wildly enthusiastic about this dictate, there are many who are not happy at all. The reason is that we’re not just talking here about enforcing a moratorium on drilling. We’re talking about putting a stranglehold on the nation’s economy. According to a press release put out this week by the International Association of Drilling Contractors (IADC), the drilling ban will have serious economic repercussions. “The federally ordered drilling suspension will idle approximately 33 deepwater mobile offshore drilling units not involved in the Macondo relief-well effort,” the press release says, each of which employs 180-280 workers, according to the Louisiana Mid-Continent Oil and Gas Association. “In addition, according to LMOGA, each of these jobs supports four other industry employees. This represents 900-1,400 jobs impacted per rig, or an aggregate 29,700-46,200 jobs total. LMOGA puts the direct wages lost as high as $330 million per month. These figures exclude job and income losses within these workers’ communities” The fact is that for every idle rig, there are not only idle rig crews, but idle helicopter transport services, idle supply boats, idle service providers… I think you get the picture. And these jobs constitute the livelihood of many people in the region. Add these unemployment numbers to those from the fishing fleet that can’t fish because of the oil slick, and the picture becomes very bleak. Although mainstream media seems incredulous about Louisianans who, despite the spill, are opposed to the moratorium, the fact is that by shutting down deepwater drilling, the US government has dealt the region a second deadly blow. The fact is that however horrible this situation is for Louisiana, the horror will not be confined to this region. The repercussions of President Obama’s decision will be extremely far reaching, and they will impact Americans across the nation. At an event hosted by Ernst & Young in Houston on Tuesday, June 8, to present the results of this year’s US E&P benchmark study, the discussion turned to the Deepwater Horizon incident and the effects it will have on the US economy. “The impact of this will be very substantive,” according to Marcela Donadio, Americas Oil & Gas Sector Leader for E&Y. The moratorium, in her opinion, will lead to “a massive shifting of jobs and operations outside the US.” We can’t forget, Donadio said, that this industry is very mobile. “All of these assets are deployable.” And once these assets leave the US, it will be hard to bring them back. “It will be the jobs here that will be lost.” John Russell, Assurance Partner, agreed. “If they leave the Gulf of Mexico,” he said, “those investments will be gone for five to 10 years.” And if those rigs leave, they also will dramatically reduce US oil production. According to Charles Swanson, Houston Office Managing Partner, the $550 to $700 billion being spent on foreign oil yearly is already bleeding the US dry. Because the moratorium will reduce production numbers, it will lead to even higher levels of oil imports. The headlines today are the oily birds. The headlines in a few months will be $4 or $5/gallon gasoline. I have to agree with Donadio, who summed it up succinctly. “The impact of this will be very, very substantive.”
2024-02-28 - The oil industry does not come off well in the movies and the public can miss the big picture.
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