U.S. Energy Policy Continues To Baffle

Todd Shriber
 
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For those that have ever been confounded, perplexed, vexed or some derivative of the word ''confused'' regarding the U.S. government's oil policies, prepare to have those feelings revved up a bit. The source of what could very well be the next U.S. misstep with regards provides the opportunity for some alliteration: Baffling, befuddling...Brazil.

That is right, the U.S. wants to be come a major buyer of Brazilian oil in the coming years. First, it is worth defining ''major'' in this case because Brazil, South America's second-largest oil producer behind Venezuela, was the eighth-largest supplier of oil the to U.S. in December, according to the U.S. Energy Information Administration. In other words, it is fair to say Brazil is already a ''major'' supplier of crude to the U.S.

OPEC members Saudi Arabia, Nigeria, Venezuela, Iraq and Angola are the countries that stand in between Brazil and Mexico, the number two oil supplier to the U.S., and it is probably safe to say buying oil from Brazil is preferable to getting it from that OPEC crew for a variety of reasons.

This is the rub: The U.S. need not purchase any more oil from Brazil and why this idea is being entertained at a time when the government has been slow to issue permits for new deepwater drilling projects in the Gulf of Mexico is almost unfathomable. In fact, the Interior Department said on Tuesday that two-thirds of the oil and natural gas leases in the Gulf sit idle right now.

What kind of numbers are we talking about here? Oh, just 11 billion barrels of crude and 50 trillion cubic feet of natural gas. The situation is barely better onshore where 45% of the leases sit idle, according to the Associated Press. Of course, it is not reasonable to expect that all of those leases would be found to be commercially viable to justify drilling, but the point is there is probably enough oil to be had in the Gulf that is not currently being tapped that the U.S. would not need to by ANY oil from Brazil.

There are costs beyond the mere purchase price of acquiring Brazilian oil. The country would likely want to the U.S. to lift its tariffs on Brazilian ethanol and buy more of that, too. Once again, why the U.S. buys foreign ethanol at all is a riddle that needs solving.

Of course, the jobs issue cannot be glossed over. The very best that can be hoped for by buying more Brazilian oil is that maybe Petrobras (PBR) will buy some equipment from U.S.-based oil services firms, creating scattered jobs along the way. On the other hand, a typical Gulf drilling platform employs 90-140 workers for two shifts a day and 180-280 workers for two two-week shifts, according to the Louisiana Mid-Continent Oil and Gas Association.

It is not out of the realm of possibility that those numbers are slightly inflated since they came from an industry trade group, but the point is these jobs will not be created in bulk by opting for Brazilian, or anyone else's oil, over what can be extracted in the U.S. Why Uncle Sam has not figured this out yet is, well, baffling.

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