Big Oil’s gargantuan profits provide a jarring reality check for those of us watching Congress in a panic to expand industry access to offshore drilling.
In an election-year maneuver designed to demonstrate to voters that Congress is doing something – anything – about gas prices, legislators are poised to give oil companies drilling rights that have been off-limits for years. The idea is to tell voters they’ve taken a step toward increasing production capacity and hope increased supply will dampen price pressure at the gas pump someday.
The current gasoline price surge is a result of political volatility in the Middle East, rapacious pricing practices by supplier nations and oil companies, and increasing demand from such emerging markets as China and India. Our domestic energy squeeze is exacerbated by Congress’ refusal to pass meaningful conservation measures, such as stricter fuel-economy requirements.
The oil companies are perfectly positioned to reap the benefits from all this.
ExxonMobil reported a 36 percent gain in second-quarter earnings, with profits at an eye-popping $10.36 billion. Royal Dutch Shell saw its earnings for the same period soar 36 percent, with net profits of $6.3 billion. ConocoPhillips’ earnings rocketed 65 percent on profits of $5.2 billion.
These aren’t exactly companies in need of the helping hand of government. But that’s exactly what they’re reaching for.
On Tuesday, the U.S. Senate passed a bill allowing drilling in 8.3 million acres in the Gulf of Mexico, an area 100 miles from the nearest land. The legislation includes a carrot to win the support of Gulf state lawmakers, diverting 37.5 percent of energy royalties from the federal government to the states of Texas, Louisiana, Mississippi and Alabama. Colorado Sen. Ken Salazar supported the bill, saying it would lessen pressure to drill on Colorado public lands.
The House version of the bill would open a broader area, allowing drilling as close as 50 miles from shore unless a state objects.
The bills will have to be reconciled before becoming law, and negotiations are expected to begin in September. On Tuesday, Republican sponsor Sen. Pete Domenici said any compromise that goes beyond 8.3 million acres would face a Senate filibuster.
That’s a start.
The oil companies have convinced most members of Congress that expanded offshore production is the logical answer to sky-high gasoline prices. The House plan goes too far and should be abandoned in conference committee. The Senate plan is much better and can be reviewed in a measured way, with environmental and economic considerations both part of the mix.
