Today the oil industry was hit with more disappointing news as the Obama administration announced their plan to abandon new offshore oil drilling leases off the U.S. southeast coast. The Interior Department stated that drilling rights for Virginia, North Carolina, South Carolina, Georgia, and Florida coasts will not be auctioned off.
Last week provided some hope for oil drillers as crude prices began to rise after an extremely disappointing year. Oil supply was up and demand fell, which left oil prices nowhere to go but down. Recently, supply was diminishing and for a short period it seemed as though demand was on the rise. Oil companies are still looking to expand throughout this volatile time as they anticipate another oil boom could be just around the corner.
The moves made by the Obama administration in regard to abandoning new offshore oil drilling was partly due to a decline in industry investment for exploration and production activities. Even though oil companies are continuing to look for the next opportunity, the steep fall in prices are fending off some would be investors.
Executives believed that the new offshore oil fields would be a fantastic way to create new jobs and help boost the economy. However, this halt in new offshore drilling sites could actually help stimulate this critical industry.
There is already a serious supply glut, that is, and continues to be, a major contributor to low oil prices. OPEC (Organization of Petroleum Exporting Countries) has opened up discussions with Russia to freeze output at current levels to help drive the price of oil back up. Saudi Arabia and other OPEC nations have been pumping oil at record levels to drive U.S. competition out of business. Even if OPEC agreed to freeze production, the oversupply of oil would still be around 1,000,000 barrels a day. There is no official word if OPEC will agree to freeze prices and Iran, OPEC member, is extremely vocal about the fact that they will refuse any production freeze request.
Now as Obama announced his plan to eliminate the U.S’s southeast coast, less sites will be available. This could lead to less oil flooding the market and higher prices.
Yet the President may be open to the idea of selling drilling rights in three spots in the Arctic throughout 2017 – 2022. Being a very delicate environment, they are still looking for outside advisement on the matter.
“We know the Arctic is a unique place of critical importance to many – including Alaska Natives who rely on the ocean for subsistence,” “We want to hear from the public to help determine whether these areas are appropriate for future leasing and how we can protect environmental, cultural and subsistence resources.” The Interior Secretary Sally Jewell said in a statement. http://usat.ly/1M5m07T
It will still be a year before the availability of Arctic drilling leases will be determined. In this time, it is possible the oil market will stabilize. As oil prices began to surge last week, there were predictions coming out that oil has the potential to double in price throughout the next year. This could mean big things for these oil companies, as well as the economy as a whole, if this prediction rings true. However, as prices fell once again this week, many still believe oil has not reached its bottom.
Only time will tell what will come of this volatile industry, but it is clear the President is keen on steering opportunity away from fossil fuels and toward renewable energy resources and infrastructure.
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