Obama pushes for increase in domestic oil production

McClatchy NewspapersMay 14, 2011 

WASHINGTON — President Barack Obama is responding to voter frustration over high gasoline prices and oil executives' criticism of his domestic drilling policies by announcing steps to "increase safe and responsible oil production here at home."

In his weekly Saturday address, the president reiterated that he's launched a task force to look at whether any fraud or market manipulation is contributing to gasoline costing more than $4 a gallon. He also renewed his call to eliminate oil companies' subsidies.

Democrats are pushing legislation to put $2 billion in annual tax breaks for the five largest oil companies instead toward deficit reduction. Republicans oppose the effort.

At the same time, Obama noted that U.S. oil production last year was at its highest level since 2003 and said: "I believe we should expand oil production in America, even as we increase safety and environmental standards."

He said he's taking several steps toward that end, including:

  • Directing the Interior Department to conduct annual lease sales in Alaska's National Petroleum Reserve
  • Creating a new interagency group to streamline Alaska drilling permits
  • Expediting evaluations of oil and gas in the mid- and south-Atlantic
  • Extending leases in Gulf of Mexico areas affected by last year's temporary moratorium after the BP oil spill

Two administration officials who spoke on condition of anonymity under ground rules set by the White House, noted that Republican lawmakers have supported some of the concepts Obama is now embracing. Drilling in the Arctic National Wildlife Refuge, however, remains "off the table," one official said.

Phil Flynn, an energy trader at PFG Best in Chicago, said what Obama is proposing is "going to open up some more lands for drilling, which is a positive." At the same time, Flynn said, "obviously it's a political move."

"The oil companies' executives' biggest complaint was 'Hey, we want to drill more but we've been thwarted by this administration,'" Flynn said. "It's a political response to that argument so that when he goes on the election trail he can say, 'Hey I opened this up.'

"On the one hand he looks like he's doing them a favor. But now he's going to frame it to say he's taking away tax breaks."

Flynn said the steps won't bring down prices overnight, but that if Obama could negotiate a deal that helps get the federal budget under control, it could have a quick impact. "If he got the budget under control, the U.S would not have to borrow as much money," he said. "That would make the dollar stronger and commodity prices lower."

U.S. oil production rose from 4.95 million bpd in 2008 to 5.36 million bpd in 2009, followed by 5.5 million bpd last year, even with the BP disaster in the Gulf of Mexico. The Energy Information Administration forecasts U.S. production to hold at that level this year and rise again next year, to 5.54 million bpd.

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