US recovery may be blocked by $120 oil - senator

23 April 2008 17:55  [Source: ICIS news]

WASHINGTON (ICIS news)--Oil at $120/bbl and higher may prevent a US economic recovery, a Senate energy leader warned on Wednesday, saying that US policymakers should move quickly to develop the nation’s vast offshore oil and gas resources.

 

Senator Pete Domenici (Republican-New Mexico), ranking member on the Senate Energy and Natural Resources Committee, told a press conference that he is “not sure that the US economy can sustain this ever-increasing price of oil”.

 

World oil prices rose to within a few cents of $120/bbl yesterday, although the price fell off by $2 in trading on Wednesday.  Overall, oil prices have nearly doubled in the last year.

 

“I think the jury is still out on the question of whether this country can maintain a viable economy, with growth of around 3% per year, with oil at $120 or maybe soon $130,” Domenici said.  “The price of oil is a huge drain on our economy.”

 

The US chemicals industry, which is heavily dependent on natural gas, and a broad coalition of other manufacturers have pressed legislators for years to lift the 26-year-old congressional moratorium on offshore development, citing the four-fold increase in natgas prices since 1999.

 

“I recognize that the current economic slump was probably caused by the housing decline and other issues in addition to energy costs, but it will be very difficult for our economy to recover with oil priced as it is because we are sending so much of our capital to foreign countries to pay for oil,” Domenici said.

 

He said that with global energy consumption increasing sharply, driven in part by emerging economies in China, India and elsewhere, world petroleum demand is outreaching production capacity and oil prices are not likely to moderate much.

 

“It is hard to believe that the US continues to import oil at such high prices when we have so much available of our own,” Domenici said.

 

“The US must do a lot more of its own production,” he added.  “We are leaving a lot of our own oil and gas reserves unattended and we ought to go get them,” he said, referring to the 85% of US offshore oil and gas reserves that are closed to development under the congressional moratorium.

 

“If we are serious about solving our energy crisis, we have to go after those offshore resources,” he said.  “It is foolish of us, with as much trouble as we’re in on energy, to leave those resources closed in.”  He said that modern drilling and production technology enables offshore development without damage to the environment.

 

Domenici’s call for an end to the offshore energy development ban followed a statement last week by a leading US House official that the sharp increases in oil prices might help force an end to the offshore ban.

By: Joe Kamalick
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