Dumb policies frustrate benefits of falling oil prices [OBAMA]!
By Peter Morici - - Monday, December 8, 2014
Falling gas prices add to holiday cheer, but those are not an unvarnished good for the U.S. economy—thanks to bad economic policy.
Oil selling at about $65 a barrel oil prices gives consumers and many businesses a lot of additional buying power, but it also puts a damper on the U.S. oil and gas boom.
For many U.S. wells, the breakeven price is much lower—for some $40 a barrel—but in the Texas Panhandle, Permian Basin and North Dakota’s Bakken fields, it can be as high as $75 to $80.
For now, U.S. oil production is likely to continue rising because once fields are built, revenues need only cover day-to-day operating costs even if producers don’t recoup initial development costs. Going forward producers will invest less in new drilling, and sales of drilling equipment have already started to drop.
The United States still imports more than 5 million barrels a day, and cheaper foreign oil adds about $75 billion to consumer purchasing power. However, the falloff in drilling activity will significantly subtract from the resulting pop to GDP and one million additional jobs some economists are predicting.
Restrictions on new pipeline development—both Keystone and other east-west projects—are forcing North Dakota producers to ship by rail millions of barrels to East Coast refineries. This adds as much as $10 a barrel to handling and shipping costs, greatly increases environmental and insurance risks, and makes new U.S. drilling projects more vulnerable to prices in the $60 to $70 range for the next several years.[more]
