President Joe Biden wants OPEC to increase oil production to counter rising gas prices here in the states while his moratorium on any new drilling stays in effect. Environmental groups welcomed the pause on new drilling, but oil industry groups are not happy, saying Biden had already cut thousands of oil and gas jobs by stopping the Keystone XL oil pipeline when he first took office. Some of those jobs affected were right here in Louisiana. Newell spoke with Eric Smith, Professor at Tulane University's Institute of Energy, about the issue of producing domestic oil.
“Unlike previous administrations, there were no restrictions on production,” Newell said. “There were no cancellation leases, there were no cancellation of pipelines. It's a little bit different than the way this has been handled, because we’re suppressing domestic oil production on one side, and on the other side, we're worried about climate change. We’re actually buying oil from some of the worst violators of climate rules when it comes to production - and we think that's a better deal?”
“It certainly was received to be a better deal, politically,” Smith said. “I think the other thing that's different is the oil that we have in surplus is a sweet crude oil that we are scarce on and need to buy it as the heavy sour crude, which is generally going to come from outside the U.S., like Russia and Saudi Arabia.”
“Between the sweet crude and the heavy sour crude, which is more likely to produce gasoline?” Newell asked.
“We originally set up our refineries to run on heavy sour crude,” Smith said. “It was cheap and we were doing a trade off that said we'll spend the extra capital to clean it up as long as we can buy it at low prices. Refineries were then modified to be able to run this heavy crude… Texas and Louisiana have the majority of these types of refineries. Louisiana has suffered as a result of not being able to import the heavy crude because we never really produced a lot of it ourselves.”
“Was that part of the importance of the Keystone XL Pipeline?” Newell said.
“That was exactly the importance,” Smith said. “Keystone was designed to take heavy sour crude from Canada and ship it down to Gulf Coast refineries. Though it wasn't a domestic source, it was at least a North American source. We also imported some from Mexico… The whole issue with the Keystone XL Pipeline was it was not really supplying an international market, it was supplying the domestic market.”
“Democrats are essentially gouging the price of gas at the pumps,” Newell said. “The backstory to this issue is that it’s artificially created by them and by their own policies.”
“It certainly aided and abetted the policies,” Smith said. “U.S. oil companies don't make huge amounts of money on refining. They tend to want to make their money on producing the crude itself. The federal government went after pipelines and the oil fields… We sit here and say those are all high paying jobs and you're hurting Louisiana and Texas. The government’s excuse is that Texas is a big state and can afford the high gas prices. Louisiana is not and I think tends to get caught in the prop wash.”
“There’s a lot of these climate related bills coming out of Congress with a 2030 deadline,” Newell said. “I kind of think these drilling moratoriums are really calculated.”
“That date is completely unrealistic,” Smith said “Anybody who wants to go look it up and find charts showing how long it takes to create an energy transition and say we're going to have half the cars be electric by 2030 just doesn't understand the oil business, the car business, or the American public.”
Hear the entire interview in the audio player below.
