Saturday, May 29, 2010

O'bama's Suspension of Deepwater Drilling

O'bama is a socialist who knows nothing about business or science. His administration cronies are legal "scholars" that write law review articles about how to subvert the Bill of Rights. These people are a menace to free markets and to our civilization.

I thought cash for clunkers was appalling - banning deepwater drilling is more misguided. Read what the CEO of Ridgewood Energy says:

An absolute 6-month ban on deepwater drilling is so short-sighted and potentially so damaging to the United States’ long-term interest because it not only idles tens of thousands of skilled-workers who, if they are like most people, live paycheck-to-paycheck, but because it also idles the enormous amount of equipment employed in the deepwater oil industry. Today, there are about 33 deepwater rigs working in the Gulf (including 2 rigs drilling relief wells at the BP site). The risk to the United States is that those 33 rigs are portable and can be towed away if they can’t be used productively here. Those rigs represent about $15-20 billion of capital assets, and the people who own them, and their bankers, can’t let them sit idle. Those rigs can be towed overseas to other jobs, and once they are towed overseas, which many of them probably will be, they will not return quickly once the ban is lifted. Typically, a company will only go to the great time and expense of towing a rig thousands of miles if it is secured by a long-term, multi-year contract. We face this potential exodus of capital assets not just with the drilling rigs, but also with the enormous industry of ancillary support equipment, including massive crew boats and supply boats, helicopter companies, drilling mud companies, drill pipe companies and all of the other related oil services. Some will move, and others will stay and hope they don’t go bankrupt.

It's very telling that crude oil is still 20% below where it was trading at the April peak. The energy sector is pricing in a depression.

Be sure to read the 1957 Robert Heinlein story that anticipates Cash for Clunkers.

1 comment:

Jason said...

Nice commentary. Some great posts lately. Keep them coming!