Dealer Outlook

Trade Only Dealer Outlook Blog

Part 2: The well from hell is changing our lives

Itís easy to empathize with those fellow dealers and boaters who are seeing their lives totally disrupted by BPís well from hell. There are serious allegations that regulations and requirements were ignored and short cuts taken on the Deepwater Horizon rig thatís created the worst environmental disaster in history. If true, our rage would be justified and the demands to end drilling in our beautiful Gulf of Mexico would seem to be validated. But, sadly, we donít really have a choice. Hereís why:

Unless we shut down the economy, we must have fossil fuels far into the future. Sure, more efficient light bulbs, energy saving appliances and cars with better mpg, for example, will cause more efficient uses of energy. Given that, the U.S. Energy Information Administration projects the growth of energy consumption should average only 0.5 percent annually from now to 2035. However, that’s still a 14 percent cumulative increase and oilís share will still be 78 percent of the total energy consumed. (Oil, along with coal and natural gas, now supplies about 85 percent of our energy needs.) But, offsetting the projected energy savings will be more people (391 million vs. 305 million), more households (147 million vs. 113 million) and more vehicles (297 million vs. 231 million). Even though wind, solar and bio energy are expected to increase 10 times faster than overall energy use, they will provide only 11 percent of the supply in 2035, up from just over 5 percent today.

Affordable, abundant energy is basic to our nationís prosperity. The transportation sector (including boats) of our economy currently accounts for 70 percent†of the nationís oil usage and thatís not expected to materially change in the future. Moreover, all the oil (currently 1.75 million barrels/day) coming from the U.S. waters in the Gulf is used in the U.S. and it represents a crucial 32 percent of our entire nationís oil.

Remarkably, just 10 years ago the Gulf was dubbed the ďdead seaĒ as its shallow water oil output had peaked and exploration was being abandoned by companies heading for better prospects in Russia and the Caspian Sea. Huge leaps, however, in three-dimensional seismic imaging and super computers opened the regionís deeper waters to successful exploration. There could be 40 billion barrels of reserves in the deep water. Several recent discoveries alone are estimated at 1.5 billion barrels.

Like it or not, its imperative we continue to tap the oil under the Gulf. In addition to providing critical jobs and economic importance to our Gulf states, it limits our dependence on insecure imports. Interestingly, China has reportedly forged a deal with Cuba to explore and tap into massive oil reserves almost within sight of Key West. The Chinese have already reopened an abandoned Russian refinery there. Hereís irony — Chinese drilling could be even more of an environmental risk since itís believed China is ill-equipped to deal with a major spill.

†The Obama administration has made two recent moves, but only one is right. The Presidentís decree for a six-month moratorium on Gulf drilling is clearly not. Already struck down once in federal court, the administration continues to pursue it, thereby idling thousands of workers . . . this while we know, without a doubt, our economy depends on the Gulfís oil. This moratorium should be lifted immediately!

On the plus side, the Presidentís immediate house cleaning at the Minerals Management Service that failed to do its job, and establishing a new Bureau of Ocean Energy Management, Regulation and Enforcement is the right call. After all, human error, corner-cutting by BP and seriously failed inspections and oversight seem the main causes of the spill. With the oil industry’s previous overall good safety record, coupled with whatís being learned from the well from hell now, good federal regulations, safety requirements and inspection programs can give us the assurances that there wonít be another well from hell. The reality is we must drill in the Gulf, so letís get back to it.

Comments

7 comments on “Part 2: The well from hell is changing our lives

  1. Sunshine State

    Not so long ago caustic emails streamed in to showroom monitors-largely erroneous threads skirting complex fishery issues……..Obama was going to stop this and that.How prophetic indeed!
    Many of us exclaimed we would have never believed we would see the day-Gulf Closure announcement as a result of the “Spill”

    Stick to the immediate aspects regarding the marine industry please.The rest is no tribute to Trade Only purpose and content.

  2. Ben Sherwood

    Norm:
    I couldn’t agree with you more. Stopping drilling in the gulf would impact all of us in the industry and in the country. We are such a long ways away from independence on oil, coal and gas. So we need to keep drilling in the gulf and also Alaska. Our industry needs oil and gas as do many others.

    Ben Sherwood, bensherwood.net

  3. Doug Reimel

    Thank you for your input Norm. And you are right. Most people I talk to do not realize that a barrel of oil is not just about energy. It is that plastic bottle you just drank water out of, and the new 42″ TV in your basement, and the new iphone you just bought, and the roof on your house, and the asphalt on your driveway. Oil is more than energy, it is in the health care tools that are used everyday. Clark oil company back in the 60s and 70s had to buld their own gas staions because they could not sell the byproduct of their business, which is gasoline. Yes oil is used to produce the casing that will hold the battery together in that next electric car someone is going to purchase. Plastic is a petroleum product. Just think what life would be like with out petroleum

    Doug Reimel

  4. Charlie J.

    Norm, I too live in St. Pete. and I make my living servicing private and commercial boats. The facts as they were presented in your two pieces are essentially correct, as I have been able to surmise. However, you and I disagree on the need for a moratorium. A moratorium IS required to allow the investigation being performed by our own Bob Graham to be completed and lessons learned promulgated and acted on. That we need Gulf oil is very clear in order to maintain our way of life. To blindly allow continued deep water drilling, at the limits of the state of the art, without using the lessons learned from the BP disaster would be criminal.
    Said another way: BP’s Plan A to prevent a blowout was the blowout preventer (BOP). The BOP’s annular seal had been damaged, and the damage acknowledged by BP management, about two weeks before the disaster. One of the two BOP actuators had failed. This fact was also known by BP management. The government agency, MMS, was corrupt and asleep at the switch.
    There was no Plan B. And here we are. We need to learn from this disaster and that will take time.

  5. AnonymousBob

    Also keep in mind the moratorium only applies to the rigs drilling for wells and not those that are currently in production. We’re looking at 1-2% of the rigs in the Gulf that are affected by the moratorium. Surely, you’ll agree that a full examination of those rigs to ensure safe operation is of some importance to ensure no future failures. Oh, and let’s not forget that 11 rig workers lost their lives due to the lack of prudent operations by BP and MMS. I’m sure they, and their families, would forego 6 months of income to have their lives back.

  6. C. Moore

    “A bob” you are wrong agian… the rigs are starting to leave the gulf not to return as there is a shortage & a demand for rigs in foreign waters like Eqypt, Brazil, China, & even just off the Cuban coast where the Chinese are referbing a refinery in cuba to accept the oil that will be produced less than 90 miles off of Key west…Business go where it is easier to do business.. get ready for higher gas prices as the oil industry shuts down in La & Texas….

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments Policy.