Oil Overload: Why Trump’s Plan to Increase Offshore Drilling May Be Unnecessary

Oil Overload: Why Trump’s Plan to Increase Offshore Drilling May Be Unnecessary

By Xavier Audick, Staff Contributor

In 2016, President Barack Obama constructed a massive barrier for the prevention of future offshore drilling when he withdrew “hundreds of millions of acres of federally owned land in the Arctic and Atlantic Ocean from new offshore oil and gas exploration.”[1] Obama utilized the Outer Continental Shelf Lands Act to execute the withdrawal, which provides that “[t]he President of the United States may…withdraw from disposition any of the unleased lands of the outer Continental Shelf.[2] At the time, Republican leaders were dismissive of the move, with Senator Ted Cruz tweeting that it was “[y]et another Obama abuse of power.”[3] Even supporters of the ban were concerned about the potential impact that an incoming Republican-controlled Congress could have on the ban.[4]

Recently, there have been reports that President Donald Trump is preparing a new executive order which would overturn the Obama ban.[5]  The executive order would direct “the Interior Department to schedule sales of new offshore oil and natural gas rights in U.S. Atlantic and Artic waters.”[6] Although this will be seen by many as President Trump making good on his campaign promises to “lift environmental regulations” in an effort to decrease the United States’ reliance on foreign oil production[7], the move may be unnecessary.

Oil prices across the board are down due to continuing fears by economists of massive oversupply.[8] These oversupply concerns resulted in The Organization of Petroleum Exporting Countries (“OPEC”) recently agreeing to cut its oil production levels for the first time in eight years.[9] Even with a decrease in overall production from OPEC, any concerns about a potential lack of total supply could soon be exterminated with the impending initial public offering of Saudi Aramco, the national oil company of Saudi Arabia.[10] Some have said that the initial public offering, which requires that Aramco provide a reserve report, could topple previous estimates by showing that Saudi Arabia has “trillions of barrels” of oil.[11] These same sources have stated that the main goal of Aramco’s initial public offering is to dissuade fracking in the United States.[12] Finally, although some have stated that a potential conflict with Syria could have a negative impact on oil markets due to its strategic position in the Middle East, these concerns are likely overblown as Syria is not a member of OPEC.[13]

All of these exterior factors lead to one clear conclusion: that any potential executive order from President Donald Trump resulting in the sale of new lands for oil and natural gas exploration is unnecessary. At least for the short-term, while oil remains in oversupply and there are no real concerns of a shortage, a change in policy that could result in drilling off the Atlantic Coast for the first time since the early 1980s seems hasty.[14] President Trump should put real thought into the potential long-term implications of such a massive policy shift before making any changes.

 

 

[1] Juliet Eilperin & Darrly Fears, President Obama Bans Oil Drilling in Large Areas of Atlantic and Artic Oceans, Wash. Post, (Dec. 20, 2016), https://www.washingtonpost.com/news/energy-environment/wp/2016/12/20/president-obama-expected-to-ban-oil-drilling-in-large-areas-of-atlantic-and-arctic-oceans/?utm_term=.d9d40bb91c1d.

[2] 43 U.S.C. § 1341(a).

[3] Eilperin & Darrly, supra note 1.

[4] See id.

[5] See Jennifer A. Dlouhy, Trump Preparing Order to Expand Offshore Oil Drilling, Bloomberg (Apr. 6, 2017), https://www.bloomberg.com/politics/articles/2017-04-06/trump-said-to-ready-order-to-expand-oil-drilling-in-u-s-waters.

[6] Id.

[7] Noah Bierman, Donald Trump Promises to ‘Lift the Restrictions on American Energy’ in Appeal to Fracking Industry, L.A. Times (Sep. 22, 2016) http://www.latimes.com/politics/la-fi-trump-fracking-20160922-snap-story.html.

[8] See Henning Gloystein, Oil Prices Dip as Oversupply Concerns Linger, Nasdaq (Apr. 6, 2017), http://www.nasdaq.com/article/oil-prices-dip-as-oversupply-concerns-linger-20170406-01347.

[9] Nayla Razzouk, Angelina Rascouet & Golnar Motevalli, OPEC Confounds Skeptics, Agrees to First Oil Cuts in 8 Years, Bloomberg (Nov. 30, 2016), https://www.bloomberg.com/news/articles/2016-11-30/opec-said-to-agree-oil-production-cuts-as-saudis-soften-on-iran.

[10] See Sri Jegarajah & Everret Rosendfeld, Who Will Win the World’s Biggest IPO?, CNBC(Mar. 1, 2017), http://www.cnbc.com/2017/03/01/saudi-aramco-listing-who-will-win-the-worlds-biggest-ipo.html.

[11] JRE #929 – Dan Peña, The Joe Rogan Experience (Mar. 10, 2017) (downloaded using iTunes.)

[12] See id.

[13] See Steve Hargreaves, Why Syria Matters to Oil Markets, CNN Money (Sep. 5, 2013), http://economy.money.cnn.com/2013/09/05/why-syria-matters-to-oil-markets/; Member Countries, OPEC.org, http://www.opec.org/opec_web/en/about_us/25.html (last visited April 10, 2017).

[14] Juliet Eilperin & Steven Mufson, Trump Moves to Open Atlantic Coast to Oil Drilling for First Time in More Than 30 years, Wash. Post (Apr. 7, 2017), https://www.washingtonpost.com/news/energy-environment/wp/2017/04/07/trump-prepares-to-overturn-obamas-limits-on-offshore-oil-drilling/?utm_term=.97326fc31b6d.

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