Huge New Chevron Oil Find in Gulf of Mexico

Oil prices have dropped from a high of $78 per barrel to $66 today. We continually predict these drops to our expert colleagues, but they alwasys believe prices will remain high. The Center believes America runs best on a price of $2-$3 per gallon for regular unleaded gasoline. Idealists get excited when the price of oil goes way up. When we tell them it will not stay there because politicians will take profits via a windfall profits tax or some other interventionist mechanism, they scoff and proclaim 'peak oil.' Oil companies know politicians will share any oil price pain, so they periodically raise and lower prices to maximize profit margins needed to satisfy investors and for investments in oil exploration and delivery. So the tar sands and oil shale projects always get delayed. But it is good to know they are there. It just takes a price of over $70 per barrel to make it profitable to exploit synthetic coal, shale and tar sand fuels.

The big Chevron Jack #2 deepwater well in the Gulf of Mexico is an historic find. Tapped about 5 miles (7,000 ft of water & 21,000 ft below sea floor) beneath the Gulf surface, the $100 million project is projected to produce 3 billion to 15 billion barrels of oil and natural gas. The well is 270 miles southwest of New Orleans and 175 miles offshore. The U.S. uses about 7.5 billion barrels of oil per year with more than half of that imported.

The find by Chevron, Devon Energy and StatOil will increase pressure to pass a conference committee report on the House and Senate approved offshore drilling bills. The Senate bill passed 71-25 Aug 1 and opens 8.3 million acres in the Gulf of Mexico, tripling the current drilling area off the Alabama coast near the Florida panhandle. The Senate measure gives 37.5% of annual oil production royalties to Louisiana, Mississippi, Texas and Alabama. The House bill passed 232-187, lifts the federal ban on offshore exploration off the East and West coasts and gives 50-70% royalties. Drilling would be allowed beyond 100 miles from shore and between 50-100 miles if state legislatures approve. States could grant exemptions to drill within 50 miles.
(Chart: Offshore 247.com)