July 1, 2020 at 5:00 am ET
As the world continues to grapple with an unprecedented pandemic, uncertainty about tomorrow still rules today. But while some familiar sights are close to returning, such as the NBA and MLB, the larger American economic outlook remains unknown. Unemployment rose at a rate comparable to the Great Depression and while some economic news has been better than expected, large swaths of the economy, such as the oil and natural gas industry, remains devastated. Just take a look at the Gulf Coast to see how painful the COVID-19 driven downturn has been.
The Gulf of Mexico was finally emerging from the 2014-2016 oil downturn when the ongoing pandemic struck. Demand for energy bottomed out almost overnight, meaning production, and jobs, were not needed. But the damage to the oil and gas industry was not only from COVID-19. The pandemic, paired with the ill-timed oil price war between state-backed production in Russia and Saudi Arabia, threw a devastating one-two punch toward workers along the Gulf Coast.
Back in February 2020, the Gulf of Mexico was nearing record highs in crude oil production, producing close to 2 million barrels of oil per day. Today, offshore companies have shut-in wells in the Gulf of Mexico. Impacts from the production shut-ins are rippling through the industry. Expected spending cuts will reach into the tens of billions of dollars and tens of thousands of people are already out of work.
While times are extraordinarily lean for offshore oil and gas workers, there is hope that the industry will bounce back once the world resumes some degree of normalcy. Oil and gas engineers, scientists, experts and thought leaders are creative and resilient, adaptable to any challenge.
However, we are only a few short months removed from Vice President Biden saying, “no offshore drilling,” during his debate with Sen. Bernie Sanders. Biden’s remark showed that there is a strong appetite in some circles for a permanent halt to Gulf of Mexico oil and gas exploration and production. Unfortunately, no amount of engineering or business acumen can solve short-sighted political expediency.
My organization, the National Ocean Industries Association, recently released a study, The Economic Impacts of the Gulf of Mexico Oil & Gas Industry. The study predicts what the Gulf Coast energy sector could look like in 2040, once we get through COVID-19 and the current downturn. The study also models what could happen if leasing bans and drilling bans are enacted.
The benefits of continued production in the Gulf are impressive. By 2040, the Gulf of Mexico energy industry could support 367,000 jobs, create $31.1 billion in annual gross domestic contributions, provide $30 billion in annual industry spending and generate $6.7 billion in annual government revenue. The offshore industry could help the American economy get back on its feet. Conversely, an offshore leasing ban would reduce the economic and employment outlook by 50 percent to 60 percent, while a drilling ban would cut them by 75 percent to 85 percent.
One of the most important findings of the study is that the Gulf of Mexico supply chain is incredibly long and diverse. The report lists 2,400 companies across all 50 states that are part of the vendor chain. And this is a significant underrepresentatio
From buoy specialists in Maine to personal protective equipment manufacturers in Minnesota to software companies in Florida to automation experts in Connecticut, every state has jobs and economic investments dependent on Gulf Coast energy production.
These companies show that, despite popular perception, the offshore oil and gas industry is not comprised by a few mega-corporations and no one else. Each offshore facility depends on hundreds of companies and thousands of workers to keep it going.
The diverse ecosystem of companies supported by the Gulf of Mexico should not be an energy footnote ended through executive fiat. Instead, by protecting the Gulf of Mexico, policymakers can preserve a key U.S. competitive asset.
In the Gulf of Mexico, companies have access to world-class infrastructure and follow some of the most robust environmental and safety standards in the world. Since 2014, the region has trailed only Guyana as being the most productive prospective offshore region. Companies want to continue investing in the Gulf. Continued investment translates to continued American energy, continued high-paying jobs, and continued national security. Gulf of Mexico can remain a prolific basin for decades to come and continue to be an energy and economic driver. Success in the Gulf means success in America.
The offshore energy industry is facing historic challenges through COVID-19 and an ill-timed price war. But we should not compound those threats even further by enacting offshore energy bans. The Gulf of Mexico is far too important to America.
Erik Milito is the president of the National Ocean Industries Association.
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