The price of oil reached a record high of $147 on July 11, 2008. Could such a sharp, unexpected spike occur again?
Reaction is pouring in after President Obama over the weekend announced his administration was seeking to permanently protect the majority of the Alaskan National Wildlife Refuge — about 12 million of 19.8 million acres — from oil and gas exploration.
The coastal plain in the refuge, home to about 200 species, as well as an estimated 10.3 billion barrels of oil (enough to satisfy U.S. consumption for about 18 months), has been “off-limits to development for years,” The Los Angeles Times writes. But:
… the White House move marks a new front in the long-running political and environmental battle over whether to authorize oil production in the refuge.
Only Congress can designate the area as protected wilderness. But even if lawmakers don’t support the measure, officials said, the Interior Department intends to continue barring oil and gas development — along with road-building and almost every other form of development.
As The Washington Post put it:
The move marks the latest instance of Obama’s aggressive use of executive authority to advance his top policy priorities. While only Congress can create a wilderness area, once the federal government identifies a place for that designation, it receives the highest level of protection until Congress acts or a future administration adopts a different approach.
Obama, in a video released Sunday, said: “Alaska’s National Wildlife Refuge is an incredible place — pristine, undisturbed. It supports caribou and polar bears, all manner of marine life, countless species of birds and fish, and for centuries it supported many Alaska Native communities. But it’s very fragile.”
Environmentalists praised the announcement, but Republican lawmakers weren’t happy, particularly Alaska Sen. Lisa Murkowski, who leads the Senate Energy and Natural Resources Committee. A statement on the senator’s website was titled “Obama, Jewell Declaring War on Alaska’s Future,” referring to Interior Secretary Sally Jewell.
“What’s coming is a stunning attack on our sovereignty and our ability to develop a strong economy that allows us, our children and our grandchildren to thrive. It’s clear this administration does not care about us, and sees us as nothing but a territory. The promises made to us at statehood, and since then, mean absolutely nothing to them. I cannot understand why this administration is willing to negotiate with Iran, but not Alaska. But we will not be run over like this. We will fight back with every resource at our disposal.”
The White House called her reaction overblown.
President Obama on Tuesday pulled Alaska’s Bristol Bay from consideration for federal oil and gas leases.
As AP reported:
The decision announced Tuesday under the federal Outer Continental Shelf Lands Act means no leases will be sold for petroleum drilling in the area. The bay provides 40 percent of America’s wild seafood and supports up to $2 billion in commercial fishing every year.
Obama said: “These waters are too special and too valuable to auction off to the highest bidder.”
Watch the video the president made announcing the decision.
The area, west of the Alaskan peninsula near the start of the Aleutian Islands, has been the subject of a tug-of-war for drilling for years. President Clinton issued a moratorium on drilling in the bay in 1995, and Congress and the executive branch have wrangled over the region ever since. This site has more on the battle.
The CEO of Oklahoma City-based petroleum producer Continental Resources is so certain oil prices will rise again that the company announced it has eliminated its oil hedges for all of 2015 and 2016.
Harold G. Hamm, whose company is the biggest oil producer in North Dakota’s Bakken oil-shale play, is “basically betting the company on the belief that oil prices won’t sink much more than the 25 percent decline they’ve experienced since June,” Forbes reported.
In its press release, which , Continental said that by eliminating its outstanding hedges, it had boosted its fourth-quarter profit by $433 million.
In the release, Hamm said:
“We view the recent downdraft in oil prices as unsustainable given the lack of fundamental change in supply and demand. Accordingly, we have elected to monetize nearly all of our outstanding oil hedges, allowing us to fully participate in what we anticipate will be an oil price recovery. While awaiting this recovery, we have elected to maintain our current level of activity and plan to defer adding rigs in 2015.”
The Wall Street Journal reports today that U.S. oil drillers are scaling back on plans to drill new wells, amid the plunge in global prices.
Nymex crude dropped 77 cents a barrel to $77.91 Thursday.
Crude is down more than 25 percent since June, making it much less profitable to drill for oil in shale-rock plays.
As WSJ (subscription required) notes:
Continental Resources Inc., a major oil producer in North Dakota’s Bakken Shale, said Wednesday that the company wouldn’t add drilling rigs next year. ConocoPhillips Co. said that next year’s budget would fall below the $16 billion spent this year, dropping plans for some new wells in places such as Colorado’s Niobrara Shale.
Pioneer Natural Resources Co. signaled that it might delay adding rigs in Texas unless oil prices rebound.
“We’re in a battle with Saudi Arabia in regard to market share,” Pioneer Chief Executive Scott Sheffield told investors Wednesday. The Irving, Texas, company hasn’t announced its drilling plans for next year, but Mr. Sheffield said they would hinge on where oil prices stand in the next few months.