Will Oil and Gasoline prices go up under the new government?

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By the time any improvements come about for an oil and gas expansion,  the new American government might even be already replaced. The current republican government has a plan to open more federal lands and waters for oil and gas drilling.  They are aiming to make U.S energy independent, however, this will take at least a few years to really happen. Oil and gas in most cases will not start coming in from government-run lands until after the current government is done its four-year term, and possibly even only after a second time in office.

The new government has promised to make a more efficient system for gas drilling on federal property. This is a process that had already begun under the past government administration, however, there were certain difficulties at hand that stopped large amounts of productions on government territory. These challenges include starting offshore projects, opposition to drilling from both a local and state perspective, as well as a changeability of the path of depressed oil prices.

Nuevo Ramsey Gas Plant, Orla, TX. EnCap Flatrock Midstream.

Economic market force plays a much larger role on gas drilling trends than government policy does. Therefore it is rather hard to place a direct correlation between a government’s policy and production on nonfederal lands.  A good example of this is that oil and gas production soared up to 4 million barrels a day during the previous government’s first seven years in office. However, most oilmen do not consider the government to have been a partner interested in improving their industry.

The government can always make efforts to increase activity on their land. There are three areas in which oil and gas production is either limited or prohibited completely. These places are the waters of the U.S Outer Continental Shelf, Alaska’s Arctic National Wildlife Refuge, as well as certain parts of the Lower 48 states.

Most federal territory oil production occurs from offshore drilling in the central and western Gulf of Mexico. In the East and West coasts, as well as in the Arctic water of north of Alaska there are smaller oil and gas reserves.

Until 2008, most drilling in these waters were prohibited.  It takes at least seven years, and can take up to ten in order to create large offshore drilling fields. Offshore processing facilities would also need to be built, and this costs approximately $1.5 billion for areas that do not already have the infrastructure set up.

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However, if that infrastructure were to be built, it would create a great deal of economic growth as well as more job opportunities. However, the current government is not very interested in investing such a large amount of money right now. Even in a place such as the Gulf of Mexico, which is full of infrastructure, there is very little new drilling due to oil prices being too low. The spending does not seem worthwhile to the government. Companies are preferring to save their money with oil prices such as these for three years already.  The firms want to see prices rise significantly, as well as stay above that level for a year, to a year and half prior to investing more in deepwater exploration.

Companies could, of course, buy offshore leases and leave them alone until the prices restore themselves. However, this would still take years.  There is a plan scheduled for 2017 to 2022 from the Bureau of Ocean Energy Management to include 10 blocks in the Gulf of Mexico, as well as one in Alaska. However, the new government could change this plan.  And furthermore, it is not certain if oil and gas companies would be interested since often times the risks are larger than the opportunity.

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The Pentagon is another party who is opposed to the offshore drilling in the South Atlantic, saying that it would make problems with missile testing and military processes. The Arctic National Wildlife Refuge in Alaska is also strongly opposed to drilling, however, the new government might still develop there, although it will take five to seven years with current conditions.

If the new government can successfully boost production on federal land, there will without a doubt be greater economic activity during the phases of developing and constructing.  However, it is more likely that the new production and added employment will only occur once their time is up.

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