The Economic Argument to Resume Gulf Drilling

Every day, more and more oil is leaking from the Gulf seabed into the ocean. It is astounding on many levels that BP has taken this long to get the situation under control. And even now, control is a short-term fix of trying to siphon the oil up to a tanker directly from the source, before it gets to the surface. But while BP scrambles to contain the economic damage of the oil leak disaster, another oil problem is threatening the regional economy. As the WSJ writings in an editorial:

The offshore drilling industry is responsible for 200,000 jobs in the Gulf region alone. Deep water wells generate 80% of the Gulf’s oil production and 45% of its natural gas, and those percentages are increasing. The Administration has not stopped current deep water production, and it says it will soon re-open in shallow waters. But its six-month ban halts work on 33 previously permitted deep water drilling rigs in the Gulf.

As Louisiana Governor Bobby Jindal explained in a recent letter to Mr. Obama, his state’s Department of Economic Development estimates the deep water drilling ban will result in a loss of 3,000 to 6,000 Louisiana jobs in the next two to three weeks alone, and potentially 10,000 in the coming months. To put that in context, the entire U.S. economy created only 41,000 new private jobs in May.

The Louisiana Mid-Continent Oil and Gas Association estimates that for each platform idled by the work stoppage, up to 1,400 jobs are at risk. That’s potentially $330 million in lost wages per month for all 33 platforms. That’s money that won’t be spent in local economies, or provide tax revenue to states that, in addition to post-recession struggles, now face oil clean-up costs. Consultants Wood Mackenzie estimate the moratorium will cost the federal government in 2011 some $120 million to $150 million in lost royalty payments and $300 million to $500 million in lost corporate taxes.

Read the whole piece here.