Alex Mills
By Alex Mills
The recent decline in crude oil prices takes me back to the winter of 2008 when prices took a roller-coaster ride south after reaching historic highs during the summer.
Crude oil prices dropped to a low of $33.87 on Dec. 20, 2008 on the New York Mercantile Exchange after reaching $140 per barrel. Gasoline prices peaked at $4.11 per gallon and tumbled in record time to $1.64 per gallon in December.
The pain was felt throughout the industry. People lost their jobs, and companies went out of business.
Again, prices have tumbled to $60 per barrel, and the industry is anxiously watching to see how low prices will go and how long they will stay there.
Looking back at 2008 and 2009, the industry cut the fat and got lean. It set the stage for a run that would last for five years and increase production in the U.S. to 9 million barrels per day and people started talking about “energy independence” again.
On optimist back in 2009 was Senator John Cornyn (R-Tx.) who wrote a column that appeared in many newspapers that pointed out the need for increased crude oil production.
“Texas leads the nation in energy production and it has the potential to contribute significantly more to America’s energy future — through traditional sources like oil and natural gas and also emerging alternative sources like wind power, solar and biomass,” Cornyn wrote.
“Unfortunately, Texas and other domestic producers are hemmed in by miles of red tape and outdated regulations that have prevented the construction of a new refinery in the U.S. for more than 30 years and barred the development of valuable resources in the Outer Continental Shelf and on other federal lands,” Cornyn said.
He pointed out that the American Petroleum Institute released a study indicating the regulatory barriers in place are blocking the development of U.S. energy resources that could yield about $1.7 trillion in government revenue. In addition to this enormous economic boost, the untapped resources would create thousands of jobs.
“Most importantly, freeing domestic resources for exploration would directly alleviate the core of America’s energy challenges — dangerous dependence on foreign energy,” Cornyn said.
Obviously, no one knows what the future has in store, but history tells us that the domestic oil and natural gas industry has been through these peaks and valleys before. The industry survived the last decline, and it came out even stronger.
Price stability would be nice, but it appears that the oil and gas industry is in for another tough period.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
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