Oil -- Not From Our Backyard

Should we be surprised? Obama wants oil producers to increase their production. A sensible person should be forgiven for thinnking Obama was referring to American oil producers that pay Americans for finding, pumping, refining and selling oil.

Instead, our feckless leader was imploring the Islamic oil nations that despise freedom, equality, plurality, capitalism and democracy to increase THEIR output to offset shortfalls caused by the revolts and revolutions in North Africa and the middle east that have begun to impinge on supplies. The actual decline in Libyan production and the fear that has affected the international oil market has driven oil prices to their high levels since 2008.

Rather than giving American oil companies the green light to expand domestic operations and thereby protect American consumers, Obama has offered the Islamic oil nations another opportunity to expand their influence over our economy. Inasmuch as he seems to have no credibility among muslims, his stature can only sink further as he effectively begs the Islamic nations to help the US.

Meanwhile, the chief issue affecting prices is FEAR. Not actual supply constraints. Sadly, Obama's approach ensures that Islamic oil producers will increase their capacity for generating oil-market fear. He is truly a moron.


Obama Says He Wants Oil Producers to Boost Output

Apr 26, 2011

WASHINGTON -- As the high cost of gasoline takes a toll on politics and pocket books, President Barack Obama said Tuesday he is calling on major oil producers such as Saudi Arabia to increase their oil supplies to help stabilize prices, warning starkly that lack of relief would harm the global economy.

"We are in a lot of conversations with the major oil producers like Saudi Arabia to let them know that it's not going to be good for them if our economy is hobbled because of high oil prices," Obama told a Detroit TV station.

President Obama is calling on an increase in oil production to help stabilize prices.

His remarks signaled a broad new appeal in the face of skyrocketing gasoline prices in the United States and they came as he reiterated a call for Congress to repeal oil industry tax breaks.

In interviews Tuesday with WXYZ in Detroit and in WKTR in Hampton Roads, Va., Obama said the message to major oil producers like Saudi Arabia is that an economy that buckles because of high oil prices won't grow and won't be good for them or for the U.S.

Obama acknowledged disruptions in oil production because of the war in Libya. But he said others can make up the difference and "we're pushing them to do so." Libya supplied less than 2 percent of world demand. Saudi Arabia and other OPEC countries already are covering some of that shortage by boosting production.

The president's effort to compel more overseas production echoed calls by President George W. Bush in 2008 urging Saudi Arabia to increase supplies during that year's spike in gasoline prices. The Saudis rebuffed Bush's efforts.

Obama said he has stressed the self-interest of oil producing nations, arguing that "if we're not growing, they're not going to be making money either.

"And so they need to increase supplies," he told WKTR.

Gas pump prices have climbed for 35 consecutive days. The national average rose by a penny to hit $3.87 a gallon on Tuesday, more than a dollar than a year ago. The price already has exceeded $4 a gallon in some regions of the country.

In a letter to congressional leaders Tuesday, Obama urged them to take steps to repeal oil industry tax breaks, reiterating a call he made in his 2012 budget proposal earlier this year. The White House conceded that plan would do nothing in the short term to lower gasoline prices.

The president wrote a day after House Speaker John Boehner, R-Ohio, said he was willing to "take a look at" repealing the multibillion-dollar tax subsidies enjoyed by the major oil companies. Boehner aides on Tuesday sought to clarify Boehner's stance, stressing that he was not advocating repeal of the tax breaks.

"He has said all along that he is opposed to raising taxes," Boehner spokesman Kevin Smith said. "That's his position."

Rising gas prices have become a political weight for the White House, with polls showing that as the cost rises at the pump, the president's approval ratings have slipped. Obama increasingly has sought to display action on oil, even as he acknowledges that there is no immediate way to stem costs.

"High oil and gasoline prices are weighing on the minds and pocketbooks of every American family," Obama wrote. But he also added that "there is no silver bullet to address rising gas prices in the short term."

Obama's proposal, spelled out in his past two budget plans, would eliminate a number of tax breaks for oil companies that would generate an estimated $4 billion a year in additional revenue.

The tax breaks - some in place since the 1920s - have survived multiple attempts to repeal them in the face of heavy oil industry lobbying.

The Republican response to the president's letter was dismissive.

Another Boehner spokesman, Brendan Buck, said Obama's suggestions "would simply raise taxes and increase the price at the pump." And Senate Republican leader Mitch McConnell said: "The president's latest call to raise taxes on U.S. energy is as predictable as it is counterproductive."

Obama's letter was addressed to Boehner, McConnell, House Democratic leader Nancy Pelosi, and Senate Majority Leader Harry Reid.

Blaming the subsidies on "outdated tax laws," Obama said money obtained from repealing the breaks should be spent on clean energy initiatives to reduce dependence on foreign oil.

On Monday, Boehner told ABC News that the government is low on revenues and that oil companies "ought to be paying their fair share."

"We certainly ought to take a look at it," Boehner said about repealing tax subsidies for major oil companies. "We're at a time when the federal government's short on revenues. We need to control spending but we need to have revenues to keep the government moving."

But Boehner made no commitment to repealing the subsidies. "I want to know what impact this is going to have on job creation in America," he told ABC.

Obama, in his letter, said he was "heartened" by Boehner's remarks. "Our political system has for too long avoided and ignored this important step, and I hope we can come together in a bipartisan manner to get it done."

White House spokesman Jay Carney dismissed suggestions that Obama's letter was motivated by the potential effect of rising gas prices on the president's political prospects.

"I don't think when somebody sticks the credit card in the pump or pays a cashier the cash for a tank of gas that they're thinking about an election in 2012," he said.

Energy, Energy Everywhere -- Unless Obama Says It Isn't

No matter what Obama and his ideological pals believe, our dominant source of energy will remain hydrocarbons. If he were thinking properly, he'd realize this inescapable truth and open the nation to more energy exploration. At the same time, he can insist on higher efficiency within the energy industry. In other words, press the industry to improve itself just as the auto industry is expected to raise its fleet fuel efficiency.

There's a lot of inefficiency in the energy industry, and the level of the inefficiency can be reduced, thereby improving our energy profile significantly. Add that to more domestic production and we will experience a surge in energy industry jobs.

Our Man-Made Energy Crisis

There's plenty of oil and no fundamental reason to expect prices of $200 per barrel. But that doesn't excuse the administration's punitive approach toward the industry

The unfolding turmoil in Libya has amplified concerns about the reliability of global energy supplies in an era of political uncertainty. Is oil at $200 per barrel inescapable? Is this the beginning of the end so vigorously underscored by peak oil enthusiasts for the last several decades? The short answer is clearly "No."

Yet the question remains: What will happen to the price of crude? This, in turn, necessitates an appreciation of the "anxiety" component in current and future prices. The anxiety premium may range from $10 to $30 given current events in Libya and their spillover effects.

The good news is that such a premium is not sustainable in the long run. Prices will eventually come down due to global excess capacity—estimated at three million to five million barrels of oil per day—and even more so due to migration of demand from oil to natural gas by electric utilities and industrial markets. Natural gas holds more than a 3-to-1 price advantage over oil on an equivalent unit energy basis in the U.S. So $200 crude is unlikely given market fundamentals.

In the context of global liquids production, the civil strife in Libya represents a minor disruption (less than 2% of the total, approximately 85 million barrels of oil per day). Nor is there any evidence to suggest that even a protracted scenario of instability will result in a sustained reduction of crude supplies. Iraqi oil production dropped by 30% at the start of the second Iraq war in 2003, and then it quickly bounced back to the prewar level of two million barrels of oil per day. Currently, Iraqi oil production stands at 2.6 million barrels of oil per day, with much higher levels projected during this decade.

Fossil fuels make up about 85% of total U.S. energy demand, which is estimated at about 45 million to 50 million barrels of oil equivalent per day. Energy imports, mainly crude oil, account for 20% of the total U.S. energy requirements. This level of imports is a huge burden on the balance of payments, hence the U.S. dollar.

What is less widely recognized is the overall inefficiency of energy utilization. According to a 2007 study by National Petroleum Council, at the request of the U.S. Department of Energy, approximately 61% of energy produced is lost due to factors such as poor insulation, gas-guzzling vehicles or suboptimal power plants. On average, only one out of three reservoir barrels is recovered, which translates to an overall efficiency of only 13% for oil that is converted to a usable form. Improving energy efficiency should be a top priority, not just in our surface usage but also at the point of extraction.

Technology is reshaping every facet of our lives. The energy world is no different. This includes the resurgence of U.S. liquid production in recent years (5.5 million barrels of oil per day and trending upward), as well as conventional gas production's six-fold increase over the last two decades (to approximately 32 billion standard cubic feet of gas per day in 2010, nearly equaling U.S. liquid production). Both are attributable to recent innovations, such as highly sophisticated wells that can reach thousands of feet underground with GPS precision.

The planet is endowed with plentiful sources of natural gas and oil, conventional and unconventional. Some estimates place global unconventional gas resources at about 33,000 trillion cubic feet, or about five times the amount of proven reserves at the end of 2009. The outlook for liquids is no less promising. At current rates of global consumption, there are sufficient oil and gas supplies to last well into the next century.

What's missing is a coherent U.S. energy policy. At best, the Obama administration's approach to U.S. domestic oil and gas production can be characterized as a strategy of ambivalence, an uneasy equilibrium between desire to lessen the role of fossil fuels and the reality of their necessity in a functioning U.S. economy. Last year's Deepwater Horizon tragedy in the Gulf tilted the current administration's policies to an even more punitive posture vis-a-vis domestic energy production.

As the French philosopher Antoine de Saint-Exupéry wisely observed, "A goal without a plan is just a wish." Unfortunately for the U.S., there is not even a wish. The time to rethink and redesign our entire energy strategy is now.

The Obama administration must seriously ponder the following questions, because they relate directly to what the president likes to call "winning the future." What will be the make-up of the energy-supply pie, and how can we dramatically increase, even double, our energy efficiency? What exactly are our carbon emission goals? And how do we go from where we are today—importing about 20% of our daily energy supply—to where we want to be in 2026, perhaps even an energy exporter?

We've already entered a new energy era that is dramatically more competitive, diverse and high-tech than the past. The global consumer is king. The future energy picture for the U.S. or the planet is not constrained by the availability of supplies, either fossil or non-fossil, but by efficiency gains in generation and consumption.

This will require real leadership and the clear articulation of energy goals, costs and priorities. Ambiguity will not serve the best interests of future generations. The U.S. does not have an energy problem. It has an energy strategy problem.

Obama raises oil prices and cuts jobs

How much more evidence do we need to prove the president is an ideologue on a mission to ruin the US economy because he believes myths about oil, energy, jobs, the auto industry and the rudiments of prosperity? He is determined to stick with his groundless, harmful beliefs that electric cars, including the Chevy Volt, which no one is buying, can change the way America travels and how it uses fuel.

How many members of the UAW have no work because car-buyers are purchasing only about 10 Chevy Volts per day? When a highly touted car model sells in such low numbers, the only word that can describe it is FLOP.

Americans want cars that run on gasoline and they want gasoline prices to drop. But Obama is standing in the way of both demands. Americans also want high paying jobs. The Energy Industry has plenty of those jobs -- when the government gets out of the way.

Since the upheavals in North Africa and the Middle East began, Obama has given no assitance to entire nations of people revolting against their tyrannical dictators and demanding democracy. His hands-off strategy says only that he willingly accepts the slaughter of citizens by their government. Libyans are dying in substantial numbers as Gaddafi's air assaults continue. What does Obama do? He goes out to play golf.

Interior appeals oil drilling ruling

The Obama administration late Friday appealed a judge's orders directing the Interior Department to act on several Gulf of Mexico deepwater drilling permits.

The appeal is the latest salvo in the ongoing fight over the speed with which Interior is – or isn't – letting oil drillers get back to work after last year's BP oil spill.

Gulf state lawmakers and the oil industry have accused the department of enacting a "de facto" moratorium against new drilling, while Interior says it needs to ensure safety and environmental protections are in place.

Friday's appeal challenges rulings by Judge Martin Feldman of the U.S. District Court for the Eastern District of Louisiana, who on Feb. 17 gave Interior 30 days to make a verdict on five pending deepwater drilling permits applications. He later added two additional permits to that order.

Interior Secretary Ken Salazar had hinted the appeal was coming at a Senate hearing Wednesday.

“The judge in this particular case in my view is wrong," Salazar said. “And we will argue the case because I don’t believe that the court has the jurisdiction to basically tell the Department of Interior what my administrative responsibilities are.”

He added, “the policy we have in mind is unmistakingly clear: We are moving forward with the development of oil and gas” production."

Earlier in February, the judge held Interior in contempt, citing "dismissive conduct" by blocking offshore drilling during last year's spill.

The delay in issuing permits since last year’s Gulf of Mexico oil spill is “increasingly inexcusable," Feldman wrote.

Interior on Monday announced the approval of the first deepwater drilling permit held up since last year’s spill. The permit, issued to Noble Energy for a well partially owned by BP, was not one of those that Feldman’s ruling addressed.

It's the Oil Industry. We gotta do something, anything, says Obama

The Obama administration wants proof that oil companies can respond to oil well disasters. How will Ken Salazar at the Interior Department know if a plan to cap a well blow-out will work? What's wrong with the current method? Based on anecdotal evidence, existing blow-out preventers have handled the job almost flawlessly for decades.

Okay. Something went terribly wrong on the Transocean rig that was destroyed in April. Seems most likely that existing blow-out preventers need some improvements to end a repeat of the Gulf disaster. But overall, BP jumped in and after working endlessly at a site a full mile below the waters' surface, it stopped the leak. I think the results speak for themselves. Pretty impressive.

Anyway, it is obvious that when it comes to the oil business -- any business -- the Obama administration has no idea what it's doing.

Obama Oil-Spill Commission Questions Drilling Halt

Aug 9, 2010


The presidential commission investigating BP Plc’s Gulf of Mexico oil spill has asked the Obama administration if a temporary ban on deep-water drilling should be lifted for certain rigs.

The commission wrote to Michael Bromwich, director of the Interior Department’s Bureau of Ocean Energy Management, on Aug. 6, seeking information on the moratorium, according to a letter released today. President Barack Obama suspended drilling in waters deeper than 500 feet though Nov. 30.

The moratorium has been criticized by the oil industry and Gulf Coast lawmakers such as Senator Mary Landrieu, a Louisiana Democrat, who told the commission last month that the ban would lead to rising unemployment in the region. Bromwich last week said drilling might resume sooner than the end of November.

“We are particularly interested in whether individual rigs, or categories of rigs, subject to the moratorium are sufficiently safe to allow the moratorium to be lifted,” the commission said in the letter.

The suspension will remain in place until companies can show they are able to prevent and contain spills such as BP’s, which spewed an estimated 4.9 million barrels of crude after an April 20 explosion aboard the Deepwater Horizon drilling rig, Interior Secretary Ken Salazar has said. Salazar told the House Oversight Committee on July 22 that he would consider modifications based on new information.

Bromwich last week began a series of public hearings on the moratorium with industry officials, academic experts and environmentalists.

Cut Short

“We may be able to cut short the moratorium,” Bromwich told reporters Aug. 3 at a briefing in Washington.

The National Commission on the BP Deepwater Horizon Spill and Offshore Drilling, which held its first hearing in New Orleans July 12, has asked Bromwich for information on how the agency is evaluating rig safety, according to the letter. Bob Graham, co-chairman of the commission, had said the panel wouldn’t have the resources to evaluate the safety of the rigs or the ability of the oil industry to respond to another spill.

The panel might use its “bully pulpit” to ensure that the Obama administration knew the region’s concerns about the drilling ban, Graham said.

Bad Mix -- Government, Oil and Water

Is anyone surprised? Our government analysts have more than enough trouble tracking and analyzing the past. Knowing their ability to understand what has already happened is weak, we should worry a lot when we rely on government predictions, especially when those predictions involve events or developments of unknowable dimensions. Like big oil leaks. Like Iran with a nuclear bomb.

BP Relied on Faulty U.S. Data

BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.

The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department's Mineral Management Service, wrong.

Oil has hit 171 miles of shoreline in southern Louisiana, Mississippi, Alabama and northern Florida. Further, government models don't address how oil released a mile below the surface would behave—despite years of concern among government scientists and oil companies about deep-water spills.

BP's efforts to contain the spill suffered a brief setback when an undersea robot hit the cap that's channeling oil to the surface. BP was able to reinstall the cap Wednesday night.

Separately, Interior Secretary Ken Salazar told lawmakers that he is reviewing how to re-draft a moratorium on new deep-water drilling in response to a federal judge's ruling that struck down a blanket six-month drilling halt ordered by President Barack Obama last month. The Obama administration on Wednesday night asked the judge to delay his court ruling while the Justice Department appeals the decision, according to the Associated Press.

The government's optimistic forecasts reinforced the oil industry's confidence in its spill-prevention technology, leading to decisions that left both oil companies and the government ill-prepared for the disaster that has unfolded in the Gulf since April 20.

BP and government agencies responding to the spill have scrambled to assemble enough oil-containing boom and the ships and hardware needed to keep oil out of marshes and off beaches. Owen Kratz, chief executive officer of Helix Energy Solutions, one of the company's working to contain the spill for BP, said Wednesday that the industry needs to have more oil containment equipment positioned to handle a blowout – instead of building containment systems after an accident.

"We hope the best science will be used going forward in this model that MMS requires," said a spokesperson for the American Petroleum Institute.

The Obama administration has launched a major overhaul of the agency that regulates offshore oil and gas drilling in the wake of the Gulf spill. "Without question, we must raise the bar for offshore oil and gas operations," a spokesperson for the Interior Department said Wednesday in response to questions about the spill models.

BP has come under heavy fire from Congress and environmental groups for its lack of readiness to handle a worst-case spill. But that criticism has overlooked a key fact: BP was required by federal regulators to base its preparations on Interior Department models that were last updated in 2004.

The government's spill models have been at the center of years of debate among scientists that study oil spills. One study in the late 1990s used satellites to track almost 100 "drifters" set loose in the Gulf of Mexico to mimic floating oil. The paths of the drifting objects were compared with what the model predicted. After 30 days, the average discrepancy was 300 miles. "We have observed differences of some magnitude," a 2003 paper said, summarizing the study.

But the researchers, led by a team of scientists from the Interior Department's MMS, concluded that the results were "neither surprising nor disappointing," and "do not negate the utility" of the model. The scientists said the findings could lead to improvements in oil-spill modeling.

.Researchers have spent the past decade trying to improve modeling of oil spills. The biggest challenge: to update the models to reflect the new reality of deep-water oil drilling. Spills thousands of feet below the surface behave very differently than spills on the surface. Underwater currents, for example, can grab plumes of oil and transport them far from the scene of the initial spill, scientists say. Deep-water releases tend to break into smaller oil slicks, further complicating efforts to forecast where they'll go.

MMS said in early 2000, in a notice to lessees, that it planned to require oil companies operating in deep-water to use new oil-spill predictions specifically designed for deep water.

That regulation never came into effect. Oil companies today still base their contingency plans on the government's models, designed only for surface spills.

In 2001, the then-head of the MMS environmental division wrote a paper that warned "the oil spill trajectory models currently used by the oil industry for the preparation of oil spill response plans may not be adequate for deep water."

Since then, MMS researchers have experimented with new models specifically designed to simulate deep-water oil spills. In 2005, after one such experiment, the MMS modeling team wrote in a paper that "spill response plans need to be upgraded" to deal with potential deep-water releases. But the models haven't incorporated new deep-water simulations.

Questions about the industry's preparedness for a spill have come up repeatedly as Congress has investigated the response to the Gulf disaster.

House lawmakers accused BP, Exxon Mobil Corp., Chevron Corp. and other companies last week of using "cookie cutter" contingency plans that contained numerous errors and omissions.

Exxon Chief Executive Rex Tillerson pointed out that much of the company's response plan "is prescribed by regulation, including the models that are used to project different scenarios for oil spills."

The MMS spill trajectory model is known as OSRA, an acronym for "oil spill risk analysis." The model simulated currents and winds in the Gulf to calculate where oil slicks would travel over a period of three, 10, and 30 days.

That model projected that a spill of oil on the surface in the Mississippi Canyon area, located 68 miles offshore, would have just an 11% chance of making landfall in Plaquemines Parish, La., after 30 days. In reality, Plaquemines, the area hardest hit by the current spill, got its first tar balls 22 days after the explosion.

The bulk of the Gulf Coast, according to the model which projects spill trajectories for 30 days maximum, would not see oil reach shore even with a catastrophic offshore spill.

BP's Troubled Waters

Obama and others are demanding cash -- now. Ironically, it may turn out that BP will hire many unemployed workers to clean the mess now accumulating in the Gulf. For taxpayers, this is good news. Instead of collecting government benefits, formerly unemployed workers might begin collecting paychecks from BP. Moreover, all the businesses harmed by the leaking oil will most likely receive full compensation from BP. Of course to ensure BP's ability to write checks to injured parties, the government should consider opening more territory to oil drilling. That way BP will have the funds to pay all its bills, even if the bills are inflated by opportunists.

BP Submits Capture Plan, Obama Seeks Escrow Account

June 14 (Bloomberg) -- BP Plc sent a revised oil-capture plan for its leaking Gulf of Mexico well to the Obama administration as the government demanded an escrow account for damages claims related to the biggest petroleum spill in the nation’s history.

BP said 53,000 barrels of oil a day can be captured by the end of June, two weeks sooner than previously proposed, according to a copy of the plan provided by the administration. BP also proposed having the capacity to get up to 80,000 barrels by mid-July. The London-based company has been collecting about 15,000 barrels a day from the leak for the last week.

The U.S. Coast Guard asked BP to capture more oil after a federal scientific panel said twice as much oil is leaking as previously estimated. White House Adviser David Axelrod yesterday called on BP to establish an escrow account for claims. Senate Majority Leader Harry Reid is requesting BP set up a $20 billion fund administered by an independent trustee, according to a draft letter issued by his office.

“We want to make sure the money is escrowed for the businesses and want to make sure the money is independently administered so it’s not slow-walked,” Axelrod said yesterday on NBC’s “Meet the Press.”

BP’s board meets today to discuss whether to reduce or defer its second-quarter dividend. The shares fell as much as 6.6 percent in London trading.

No Decision Expected

“The board will be looking at a number of options when it meets,” Sheila Williams, a spokeswoman for BP, said yesterday. “No decision is expected this week.”

Jon Pack, a BP spokesman in Houston, said he was unaware of the revised recovery plan and couldn’t immediately comment on it.

BP and the Coast Guard expect some leakage to continue at least until mid-August, when the first of two so-called relief wells can plug the bottom of the damaged well.

The company will start taking oil and natural gas from the damaged well to a ship on the surface through a separate pipe in the next few days, and a “more permanent and flexible” system with floating risers is set to begin operations around the end of the month, according to a statement today.

“Plans are being developed to further develop these systems and also for further options to provide additional containment capacity and flexibility, in line with requests made by the U.S. Coast Guard,” BP said. The company was able to capture 127,000 barrels from June 4 until June 12.

Obama Address

Obama will address the nation at 8 p.m. tomorrow, after he returns from a two-day visit to Alabama, Mississippi and Florida, said Ben LaBolt, White House spokesman.

The president is scheduled to meet June 16 at the White House with BP’s chairman, Carl-Henric Svanberg, and other company officials. BP Chief Executive Officer Tony Hayward is also expected to attend, Coast Guard Admiral Thad Allen said yesterday.

Establishing the reserve account will be a subject for “discussion,” Axelrod said. “But it has to be substantial. BP has the resources to meet the claims and we’re going to make sure they do.”

Allen said having an independent administrator for the escrow account would make sure that the response to claims “happens quicker.”

“We’ve been very concerned about the claims process,” he said yesterday on CBS’s “Face the Nation” program. “This is not a core function of an oil-producing company.”

$37 Billion Cost

The cleanup costs and legal liabilities resulting from the leak may reach $37 billion, according to Credit Suisse Group AG. BP said today it has spent $1.6 billion so far on the response to the spill.

BP fell 23.85 pence, or 6.1 percent, to 368.05 pence at 2:19 p.m. in London trading. The shares are down 44 percent since the April 20 explosion aboard the Deepwater Horizon drilling rig in the Gulf, resulting in the deaths of 11 workers.

BP’s revised plan calls for keeping more oil-recovery ships at the spill site and adding vessels that can process and shuttle the captured oil ashore.

Oil gushed from the well at a daily rate of 20,000 barrels a day to 40,000 barrels through June 3, when BP removed a kinked pipe that may have been curtailing the flow, a panel of government scientists said June 10. One research team said the rate might have been 50,000 barrels a day.

Installing Sensors

BP, at the request of the government’s flow-rate group, was installing pressure sensors yesterday on the well to help determine the leak rate, said Mark Proegler, a company spokesman.

In its application for the well, BP told the government it was prepared for a worst-case oil spill of 250,000 barrels a day.

The spill has closed as much as 37 percent of the Gulf of Mexico to fishing, cut the number of offshore drilling rigs in the nation by half and polluted 140 miles of shoreline from Louisiana to Florida.

Oil and Water

It should be obvious that less offshore drilling is unlikely to prevent or reduce oil spills. Prior to the current leak in the Gulf of Mexico, the biggest leak came from the Exxon Valdez, a ship. Not a producing well. If we drill less, then we will import more, and more of the imported oil will arrive by ship. More ships means more potential for leaks.

Drilling in Deep Water
A ban on offshore production won't mean fewer oil spills

It could be months before we know what caused the explosion and oil spill below the drilling rig Deepwater Horizon. But as we add up the economic costs and environmental damage (and mourn the 11 oil workers who died), we should also put the disaster in some perspective.

Washington is, as usual, showing no such restraint. As the oil in the Gulf of Mexico moves toward the Louisiana and Florida coasts, the left is already demanding that President Obama reverse his baby steps toward more offshore drilling. The Administration has partly obliged, declaring a moratorium pending an investigation. The President has raised the political temperature himself, declaring yesterday that the spill is a "massive and potentially unprecedented environmental disaster."

The harm will be considerable, which is why it is fortunate that such spills are so rare. The most recent spill of this magnitude was the Exxon Valdez tanker accident in 1989. The largest before that was the Santa Barbara offshore oil well leak in 1969.

Workers load oil booms onto a crew boat to assist in the containment of oil from a leaking pipeline in the Gulf of Mexico.

.The infrequency of big spills is extraordinary considering the size of the offshore oil industry that provides Americans with affordable energy. According to the Interior Department's most recent data, in 2002 the Outer Continental Shelf had 4,000 oil and gas facilities, 80,000 workers in offshore and support activities, and 33,000 miles of pipeline. Between 1985 and 2001, these offshore facilities produced seven billion barrels of oil. The spill rate was a minuscule 0.001%.

According to the National Academy of Sciences—which in 2002 completed the third version of its "Oil in the Sea" report—only 1% of oil discharges in North Americas are related to petroleum extraction. Some 62% of oil in U.S. waters is due to natural seepage from the ocean floor, putting 47 million gallons of crude oil into North American water every year. The Gulf leak is estimated to have leaked between two million and three million gallons in two weeks.

Such an accident is still unacceptable, which is why the drilling industry has invested heavily to prevent them. The BP well had a blowout preventer, which contains several mechanisms designed to seal pipes in the event of a problem. These protections have worked in the past, and the reason for the failure this time is unknown. This was no routine safety failure but a surprising first.

One reason the industry has a good track record is precisely because of the financial consequences of accidents. The Exxon Valdez dumped 260,000 barrels of oil, and Exxon spent $3.14 billion on cleanup. Do the math, and Exxon spent nearly 600 times more on cleanup and litigation than what the oil was worth at that time.

As for the environmental damage in the Gulf, much will depend on the weather that has made it more difficult to plug the leak and contain the spill before it reaches shore. The winds could push oil over the emergency containment barriers, or they could keep the oil swirling offshore, where it may sink and thus do less damage.

It is worth noting that this could have been worse. The Exxon Valdez caused so much damage in part because the state of Alaska dithered over an emergency spill response. Congress then passed the 1990 Oil Pollution Act that mandated more safety measures, and it gave the Coast Guard new powers during spill emergencies. We have seen the benefits in the last two weeks as the Coast Guard has deployed several containment techniques—from burning and chemical dispersants to physical barriers. America sometimes learns from its mistakes.

On the other hand, Washington's aversion to drilling closer to shore has pushed the industry into deeper, more difficult, waters farther out to sea. BP's well is 5,000 feet down, at a depth and pressure that test the most advanced engineering and technology. The depth complicates containment efforts when there is a disaster.

As for a drilling moratorium, it is no guarantee against oil spills. It may even lead to more of them. Political fantasies about ending our oil addiction notwithstanding, the U.S. economy will need oil and other fossil fuels for decades to come. If we don't drill for it at home, the oil will have to arrive by tanker and barges. Tankers are responsible for more spills than offshore wells, and those spills tend to be bigger and closer to shore—which usually means more environmental harm.

The larger reality is that energy production is never going to be accident free. No difficult human endeavor is, whether space travel or using giant cranes to build skyscrapers. The rest of the world is working to exploit its offshore oil and gas reserves despite the risk of spills. We need to be mindful of such risks, and to include prevention and clean up in the cost of doing business, but a modern economy can't run without oil.