Oil and gas leaders at an LSU energy roundtable held Wednesday painted a bleak picture of the state of oil production in the Gulf of Mexico and warned against anti-free trade rhetoric heard on the presidential campaign trail.
“The news is not good,” Eric Smith, associate director of the Tulane Energy Institute, said of the oil industry in Louisiana. Other speakers also noted the forecasts for oil companies in the coming years do not look good, barring a major rebound in oil prices.
After rising to more than $100 per barrel in the summer of 2014, the price of oil collapsed last year, roiling the industry in Louisiana and helping plunge the state into a recession. The state budget languished, with royalties for natural resources losing hundreds of millions of dollars. Along with lagging tax collections, the declining price of oil contributed to a budget crisis on the tail end of former Gov. Bobby Jindal’s tenure.
“At the very time we’re down, we got kicked again with new rules” on Gulf of Mexico oil drilling, especially after the BP oil spill in 2010 that killed 11 and dumped millions of gallons of oil into the Gulf, said Loren Scott, an LSU professor emeritus and CEO of Loren C. Scott & Associates.
The shale boom drove down prices, and now offshore oil production is more expensive than onshore shale production, Smith said. The Organization of the Petroleum Exporting Countries recently pledged to slow down production, but those on the panel were skeptical that the countries—which include Saudi Arabia, Libya and Iraq—will follow through. A number of those countries have already backed out of the agreement, which would cut production by 2%.
And in the long run, policies and divestment stemming from climate change are a dark spot on the fossil fuel industry, which Rice University energy fellow Jim Krane said comprises two-thirds of human-produced greenhouse gases. Krane hosted a lecture on some of the risks that climate change poses to oil and gas companies.
On free trade, the panel railed against Republican presidential nominee Donald Trump’s rhetoric blasting “bad trade deals” like the North American Free Trade Agreement, which was signed into law by former President Bill Clinton and took effect in 1994.
“I’ve never seen a time when there’s been such anti-free trade fervent,” Scott said. “If there’s one thing economists agree on, it’s that free trade is a good thing.”
The speakers also noted that while Louisiana lost 12,000 jobs after Fruit of the Loom left following NAFTA, per capita income and employment has been a net gain following the free trade pact.
—Sam Karlin
