Davis: Gasoline Price Surge Caused by Government Blunders

On March 11^th, the Obama administration granted the first federal permit for deep water drilling in the Gulf of Mexico since a moratorium was put in place last May. With the political instability in Libya, Saudi Arabia, and elsewhere in the Middle East, gasoline prices have begun to surge. Last week I paid $3.37 per gallon. Many experts are predicting $4.00 per gallon of gasoline this summer and possibly higher later this year. These facts make it clear that we must free ourselves from our dependence of foreign oil and use the domestic and other reliable sources of oil which are readily available.

Since President Obama assumed office, gas prices have risen 87%. Part of the explanation is that global demand for oil is rising, and the competition for foreign resources has intensified. By 2035, the United States, Japan, Europe, China, and India are projected to need 25% more imported oil than in 2005, with China and India accounting for the major portion of that increase.

Also, part of the explanation to our current crisis is that the Obama Administration has not done what is prudent in regard to our domestic energy sources. Oil and gas exploration in the Gulf’s deep waters has been stopped since May when President Barack Obama announced a six-month drilling moratorium in the wake of the April explosion of the Deepwater Horizon drilling rig which killed 11 workers and set off the worst offshore oil spill in U.S. history. The administration lifted the ban in October – a month ahead of schedule – but hadn’t issued until last week any permits for new deep water oil wells. In January, The Wall Street Journal reported that the delay has hurt both the oil industry, which has seen billions of dollars in projects put on hold, and the Gulf Coast’s economy, which has been hit hard by the slowdown.

Rather than dwelling on the ill-conceived “cap and trade” legislation designed to reduce carbon emissions, the President needs to encourage domestic exploration of our substantial petroleum reserves currently locked up in Alaska, off-shore and shale oil in our Western states. According to the Energy Information Agency, domestic offshore oil production will fall 13 % in 2011, a loss of about 220,000 barrels/day, mainly due to the lack of permits for the Gulf of Mexico. If we use the reserves that we have and increase domestic refining, we can protect our nations from the uncertainty caused by unreliable foreign markets.

In addition to failing to develop domestic markets, the Obama Administration is setting on their hands in granting a permit which would permit additional Canadian crude oil to be delivered to the United States by pipeline. On June 30, 2010, TransCanada Corporation commenced commercial operation of the first phase of the Keystone Pipeline system. Keystone’s first phase was highlighted by the 537 mile conversion of natural gas pipeline to crude oil pipeline and construction of an innovative bullet line that brings the crude oil non-stop from Canada through North Dakota, South Dakota, Nebraska, Kansas, Missouri and Illinois to market hubs in the U.S. Midwest.

When completed, the planned project will increase the commercial capacity of the Keystone Pipeline System from 590,000 barrels per day to approximately 1.1million barrels per day. This indecision by the President has been made based upon unreasonable environmental concerns. Realizing that this may bring some immediate relief to our state, I recently signed a letter to Secretary of State Hillary Clinton which was signed by dozens of state legislators across our nation encouraging her to act promptly on this permit request. I am hoping for a prompt decision. If we are to have a stable and reliable energy supply, we need to act now to unlock our vast domestic oil reserves and take advantage of the oil available from our neighbor to the north.