Feds: No new drilling permits, but we'll tap into Strategic Petroleum Reserve! 

Oil prices have been on the rise recently, with supply worries from the unrest in the Middle East pushing prices past $106 a barrel this morning, the highest in two years. Americans are feeling the sting of an average $3.50 a gallon price at the pump, with prices as high as $5 a gallon in some areas such as L.A.

The Obama administration has issued contradictory statements on the high oil prices. On Friday the Obama administration appealed a judge's ruling that the Department of Interior stop holding up the application process of several deepwater drilling permits. The move effectively continues the de facto ban on deepwater drilling in the Gulf. On Sunday however, White House Chief of Staff Bill Daley said the Obama administration is considering tapping into the U.S. Strategic Petroleum Reserve as one way to help ease soaring oil prices.

Interior has imposed a de facto moratorium on deepwater drilling since the BP oil spill last year.

Legally, companies can still apply for permits, but they are generally either refused or held up indefinitely with bureaucratic red tape. Since the spill, only one new permit has been issued -- that occurred last Monday. The recipient was Noble Energy, and for a well partially owned by BP.

The administration's foot-dragging is cutting off access to several large proven reserves, as the Gulf Region accounts for one-third of U.S. crude oil production, according to the U.S. Energy Information Administration.

The SPR is far less useful to the economy than newly producing oil wells. It holds only 726.7 million barrels -- that's enough to keep running America for 34 days in the event of a catastrophic oil cutoff, but the distribution capacity is limited, allowing for only 4.4 million barrels of oil to be withdrawn each day.

If the administration wants to create a more permanent solution to high oil prices then they should stop blocking attempts to reach more oil. Even if the SPR is utilized, it's ultimately a temporary solution, as eventually the reserves will run out. In the event of a protracted civil war in Libya, our government could be forced to replenish the SPR later at the same sky-high prices we are experiencing now. On the other hand, new deepwater wells and broadly expanded drilling would give American firms an opportunity to hire more workers to good paying jobs, cash in now while the market is hot (instead of increasing supply from foreign sources) and save our emergency reserve for a real emergency.

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Staff Report

Staff Report

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A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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