ActivePaper Archive More need to know the joy of tar balls - Houston Chronicle, 1/8/2018


More need to know the joy of tar balls


Why should only Texas schoolchildren enjoy the privilege of spending summer days spotting oil rigs during their beach vacations?

Or trying to avoid tar balls on the beach?

When my parents took me to Galveston in the summer, I spent hours scanning the horizon to spot cargo ships and oil rigs. Afterward, my mother spent hours trying to the get tar stains out of my bathing suit and beach towel.

Thanks to President Donald Trump, children visiting almost any beach in the U.S. could learn important life lessons about the petroleum industry the same way I did. Interior Secretary Ryan Zinke wouldn’t have it any other way.

“This is the largest number of lease sales ever proposed,” Zinke said last week in announcing that 90 percent of American waters could open up for drilling. “If you look at the last eight years, the opportunity to generate revenue through responsible energy development took a back seat to, in many cases, special interest groups.”

All of the environmental groups and coastal residents expressing shock and dismay at the Trump administration’s announcement should give it a rest. Trump won the election, and elections have consequences.

Personal choices also have national implications. Oil companies drill and refine crude because commuters demand it, especially in the U.S., where most people shun public transportation. If you drive an internal combustion vehicle to work alone, you encourage oil drilling.

You can send out angry tweets, donate to environmental groups and call your lawmakers all day long, but only less demand for oil will truly curtail drilling. The good news is that changing energy and transportation markets will likely discourage drilling in most places, no matter what Zinke does.

The world currently has about 1.5 million barrels a day of excess capacity, mostly created by American companies hydraulically fracturing shale. When OPEC allowed prices to float freely, crude dropped 50 percent. When shale drillers didn’t shut down, OPEC took the excess barrels off the market to prop up prices before its members went broke.

Today, oil prices are close to the actual cost of extracting crude, plus a reasonable profit, about $60 a barrel. But that’s only because the lowest-cost producers, OPEC and Russia, are holding back. If high-cost producers enter the market, as from Arctic wells, OPEC and Russia will release their crude back into the market and shut them down.

That’s why Zinke’s “largest ever” lease sale in Alaska’s Arctic Reserve was such a flop back in December. Producing oil there is so expensive that just two companies bid a total of $1.2 million for only seven of the 900 tracts Zinke put up for auction.

The economics of drilling off the East and West coasts are equally daunting. Zinke can offer tracts, but state environmental laws may still apply, particularly to the vessels that supply the rigs and bring the product ashore.

In most of these areas, there is no exiting infrastructure, such as underwater pipelines or logistics hubs, which make these areas even more expensive to develop. The one important exception is the eastern Gulf of Mexico, along Florida’s west coast, where new wells can tie into existing pipelines to the west.

Zinke likes to parrot Trump’s macho pledge to secure “American energy dominance,” and he often talks about domestic oil and gas production as a national security issue. But a new paper by energy experts Ken Medlock and Jim Krane, at Rice University’s Baker Institute, reports that U.S. energy supplies have never been more secure.

“Ongoing trends in global oil markets appear to be pointing to continued improvement in the security of U.S. oil supply,” they wrote in a paper for the journal Energy Policy. “U.S. domestic production is increasing, as is the geographic diversity of global oil supply, and environmental pressures are encouraging greater efficiency and adoption of substitute technologies. All of these factors contribute to U.S. oil security.”

The biggest danger to U.S. energy security? Trump’s erratic foreign policy.

“The Trump administration’s transactional approach to international relations has intensified the uncertainty of an already volatile period among oil exporting states,” they added.

A rational foreign policy would do more to secure American energy security than drilling off California.

Lastly, buying these offshore leases, conducting seismic testing and drilling the first exploratory rigs will likely take oil companies a decade and cost billions. As I’ve written before, by 2025, electric and autonomous vehicles will be in full production, and many energy companies question whether demand for crude will remain at current levels, thus making such investment worthwhile.

Expanding offshore drilling to 90 percent of the U.S. coastline, while slashing safety regulations, could result in environmental catastrophes. But this is what Americans elected Trump to do.

If you really want to do something about it, reduce your personal energy consumption. Politicians will always have the power to rewrite laws, but the law of supply and demand is immutable.

Chris Tomlinson is the Chronicle’s business