Obama Takes Command, Buys Some Time and Pisses Off the Oil Industry

Last Updated May 28, 2010 3:15 PM EDT

President Obama tried Thursday in a televised press conference to allay fears and squelch criticism of his administration's response to the Gulf oil spill. Whether Obama accomplished that is up for debate. He did, however, manage to piss off the oil industry with sweeping new rules on offshore drilling that could derail projects worth $7.6 billion in government revenue.

Obama, who just two months ago announced plans to expand offshore drilling, finds himself in an unenviable position. BP's gushing well in the Gulf of Mexico has created the worst oil spill in U.S. history. And yet, several factors continues to steer us back to offshore drilling: Our massive appetite for fossil fuels; our desire to become energy independent; and the lack of a cheap, readily available alternative that can totally replace oil and gas.

The president's orders For now, Obama is taking the "let's catch our breath" approach, otherwise known as buying some time. And that's bad news for the oil industry.

  • All 33 deepwater oil rigs in the Gulf of Mexico must stop drilling exploratory wells;
  • A moratorium on new deepwater wells has been extended six months;
  • Canceled leases sales in the Gulf and off the Virginia coast;
  • Planned exploration offshore Alaska has been put on hold.
Shell (RDS.A) stands to lose the most at the moment because it planned to begin drilling offshore Alaska after years of delays. Shell has paid upwards of $2.1 billion to acquire 275 lease blocks in the Chukchi Sea in 2008, but has yet to turn a single drill bit because of legal challenges, and now, this latest delay.

There is one exception in all this. The moratorium and other rules apply to deepwater drilling. The federal government will soon begin to approve new permits for drilling in shallow waters of less than 500 feet.

Obama still believes, as he told reporters Thursday, "domestic oil production is an important part of our overall energy mix." Where he went wrong was "in the belief that the oil companies had their acts together when it came to worst-case scenario," he said.

Oil industry responds, and they're not pleased The response from the oil industry isn't so surprising. Most companies highlighted the growing need for domestic oil and gas and their commitment to safety. Although the strong statements in support of offshore drilling are pretty ballsy, considering the current mess in the Gulf of Mexico.

Some oil companies, like Chevron (CVX) took the opportunity to distance themselves from the the likes of BP. Chevron noted, in a statement e-mailed to BNET on Thursday, that it participated last week in a task force which made recommendations to the Interior Department to raise operating standards. Chevron managed to get in a few "we're not like the other guy" jabs as well and noted that it shared the government's commitment to ensure all (Chevron's emphasis) companies are operating at the same standards.

The American Petroleum Institute went with the "Armageddon is coming" approach. CEO Jack Gerard first listed, in a statement, all the products we can't live without (all very true) and later capped it all off in a fire-and-brimstone finale.

But this issue is much larger than the oil industry, since access to affordable energy impacts every sector of our economy, every state in our nation and every American family. Further, thousands of products -- from toothpaste to iPods, cell phones to computers, and vitamins to vegetables -- use oil and natural gas as a feedstock in the manufacturing process.

Decisions that impact the industry's ability to produce the oil and natural gas this country needs in every sector of our economy and in every household in this country will affect the lives of every citizen, every day.

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