re: #319 Bagua

Indeed.

Just the six month moratorium should result in a decline in new production of about 3 to 4 hundred thousand barrels per day. This new production is the only thing keeping US production stable as onshore and shallow wells run dry. This is enough to influence the oil price, but not by very much.

Longer term though, there is no such thing as a six month moratorium. The rigs cost $500,000 per day just to sit idle. They wont. They are already moving rigs, men and materials out of the Gulf and this will continue. Those rigs will not be back anytime soon, if ever. They will be occupied drilling were they go next.

New regulations, if and when the moratorium is lifted, would also add several years to the time needed to build new rigs. This six month moratorium will at minimum cause a six year delay in getting back to where we were, perhaps ten years. And that assumes the moratorium is lifted after six months.

I think this is a brave decision by Obama as it likely will mean no second term for him. It was a chance to impose a de facto Cap on the oil industry, with wide public support and sounding perfectly reasonable in light of events. Another beneficial crisis. For good or for bad depends on one’s perspective.

I see no huge outcry over this moratorium, so I’m guessing most folks are seeing it as a good thing, OR it hasn’t hit home to them what it will mean in terms of gas prices and the US reliance on imports.