From Jim Hamilton
In January 2008, ExxonMobil and Norway’s Statoil announced a promising discovery in the Julia Field in the Gulf of Mexico that may contain a billion barrels of oil. In October of that year, Exxon applied for a 5-year extension of the lease for time to develop a suitable development plan. To the company’s surprise, the U.S. Department of Interior denied the request in February 2009, and has continued to turn down subsequent appeals.
Hamilton goes on to suggest that there are currently 10 idle rigs in the gulf representing at least 10,000 jobs in mining that could be filled.
Besides the obvious desire to not approve another Deep Water Horizon on their watch does anyone have an explanation for this?
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Monday ~ August 29th, 2011 at 12:54 am
White Rabbit
Oh, you need to stop reading only the big-oil friendly reporting of this incident and think about the big picture and the ultimate motivations of Exxon:
The ultimate goal of Exxon is to produce oil at a sweet spot price: not too cheap (which eats into profits) but not too expensive either (which pushes development of alternatives and increases the risks of windfall-profit taxation on quasi-monopoly income and other adverse public policy responses).
Hoe does big oil achieve this balancing act? By developing capacity but not committing to produce from the new fields. This gives the monopolistic maximum leeway to maximize profits: they can increase production if oil price is too high and decrease production if it’s too low.
That is exactly what happened with the Julia field: they did not get an extension to not produce oil from the Julia field but still own the capacity…
What is the public interest during a partly oil price induced slump? More oil production, of course. Remember, this oil, like all unsold mineral rights in the US is currently owned by the public, by American citizens. It is part of the public capital that backs public U.S. debt.
Why should the U.S. government squander this public capital and allow a co-monopolist use it to manipulate oil prices, to the detriment of the rest of the US economy?
The U.S. government being a diligent, resolute negotiator of public property (for a change) looks entirely reasonable and justified.
For every drilling job (btw., a fair portion of the Julia field is already drilled, the dispute is about allowing Exxon to hold back production and keep the capacity idle), there’s 10 other US jobs that are missing due to too high oil prices and due to the slump they trigger.
Monday ~ August 29th, 2011 at 10:10 am
Th
Do you know if these leases have been back up for bid or can Exxon still drill now?
Monday ~ August 29th, 2011 at 12:57 am
White Rabbit
(Dear blog admin, please add the missing closing bold-tag to the comment above and delete this comment. Sorry.)
Monday ~ August 29th, 2011 at 9:59 pm
Benny Lava
Question: as a fairly young person, what is the rationality behind drilling like crazy now? So that when my generation is old we are completely beholden to Iraq and Venezuela? Thanks a lot, selfish jerks.
Friday ~ May 3rd, 2013 at 4:35 pm
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