President Obama's plan to raise taxes on the oil industry by an additional $4 billion a year never made much sense. Declaring open war on U.S. oil companies would reduce investment in domestic oil production and lead to even greater dependence on imported oil. It would result in a loss of jobs and royalty revenue, too.
Denigrating an industry that supplies about 60 percent of the energy used to power our $14 trillion economy isn't the right thing to do, especially at a time when we're less than a year into a weak recovery from the worst economic slump since the end of World War II.
Instead of agreeing to Obama's foolish tax, Congress should vote to open up new areas off the Atlantic Coast and in the eastern Gulf of Mexico to drilling for oil and natural gas. Considering that Americans are shelling out more than $1 billion a day for imported oil, it would be absurd if we were not to make better use of our domestic energy resources. The U.S. Geological Survey estimates that areas off the Atlantic Coast and in the eastern Gulf contain 3.8 billion barrels of oil.
The reality is we need the oil. The nation's demand for oil continues to grow, rising more than 35 percent over the past four decades, while domestic production has declined by a third. We currently buy more than 12 million barrels of oil a day from other countries, several of whom like Venezuela are hostile to U.S. interests.
The level of oil imports would be even higher if not for a 3-percent increase in domestic production in 2010, due largely to success in producing oil in the Bakken shale field in North Dakota and the Eagleford shale in Texas. Oil production from shale there has risen to more than 350,000 barrels a day, and is expected to reach 800,000 barrels a day in five to seven years thanks to the prospect of new production from the Utica shale in Ohio which may hold as much as 3 billion barrels of recoverable oil. All of this production was made possible by the same hydraulic fracturing and horizontal drilling techniques that have increased natural gas production in the Marcellus shale in West Virginia and Pennsylvania.
Most of America's oil resources are in deepwater offshore, and it's in these areas where new advances in drilling technology could be a real game-changer. In the year since the BP Macondo disaster, 24 oil companies have pooled their resources to develop an apparatus designed to work like a small blowout preventer. Known as a capping stack, it can work in deepwater wells with pressures of up to 15,000 pounds per square inch, and should help ease concerns about drilling in the Gulf.
None of this is cheap. The cost of finding and producing oil is mounting. It now costs upwards of $100 million to drill a well in deepwater. The cost of drilling a horizontal well in the Utica shale in Ohio will likely cost $4 million or more. Producing the energy needed to drive our nation's economy requires massive capital investments. Since 2000, the oil industry has poured more than $2 trillion into U.S. capital projects.
But the Obama Administration's actions directly contradict what the market requires. Clamping additional taxes and drilling restrictions on the oil industry will make it even harder for U.S. companies to meet our country's energy needs and are doing nothing to advance our long-term energy security. At a time when gasoline prices are hitting or exceeding $4 a gallon, it's time to start asking our congressman and our president to loosen the noose on the petroleum industry and give American workers the opportunity to solve our energy problem.
Now is the time for Congress to show that it's serious about reducing our reliance on foreign oil. The House and Senate need to reject the Administration's proposed tax on the oil industry and approve legislation that removes barriers to exploratory drilling on the U.S. Outer Continental Shelf and in Alaska.
According to a study by ICF International, expanding domestic energy development in America's offshore areas could alone generate $1.3 trillion in government revenues over the life of the resource - along with major increases in jobs and economic activity that result from oil and natural gas development.
That's something to consider the next time anyone questions the value of offshore production.
Robert W. Chase is chair and professor of Marietta College's Department of Petroleum Engineering and Geology, 215 Fifth St., Marietta.