Today’s Wall Street Journal reports on a huge new find in the Gulf of Mexico, which Exxon estimates at 700 million barrels of oil — about 100 times the entire daily oil production of Saudi Arabia, from all its oil wells. The Obama administration is still slow-walking the permits for drilling in the Gulf, having issued only 15 since the end of the moratorium late last year. But one of the permits went to Exxon, and it struck “black gold.”
The great energy irony of recent years is that governments have thrown hundreds of billions of dollars at wind, solar, ethanol and other alternative fuels, yet the major breakthroughs have taken place in the traditional oil and natural gas business. Hydraulic fracturing in shale, horizontal drilling and new seismic techniques are only the best known examples.
A catalogue of the many ways in which the Obama administration tries to disfavor fossil fuel production would be quite a massive undertaking, but the allocation of government subsidies and penalties is a glaring example. Efforts to penalize traditional energy companies are a constant worry — particularly when the administration pursues policies that drive up the price of oil and gas, which translates into windfall profits for the industry, which leads the administration to call for penalties against it. But the other side of the coin is the wasteful subsidy of non-economical energy sources. It is a particularly embarrassing waste of money when, from the Marcellus Shale to the Barnett Shale to the oil shales of the western states and to Gulf, virtually all the great discoveries and technological innovations in the energy industry are coming in the traditional oil and gas sector.
– Mario Loyola