Just how fragile and interconnected the world’s oil markets are was glaringly evident when BP announced it would have to shut down production at its Prudhoe Bay field in Alaska, accounting for 8 percent of domestic U.S. production, to replace up to 16 miles of corroded pipeline.
Crude oil prices surged $2.22 a barrel to $76.98, just a nickel away from the nominal record set last month. (For whatever consolation, prices in inflation-adjusted terms were higher in 1980-81.)
Future increases may be moderated somewhat by the Bush administration’s quickly announcing that it would use the Strategic Petroleum Reserve to boost supplies; OPEC’s volunteering to make up the shortfall; and BP’s saying it would try to find alternate ways of getting at least some of the Prudhoe Bay oil to market.
But what with hurricanes, wars and petro politics, the United States didn’t need another disruption. The search for alternative fuels and sources of power can, and must, go on, but as a practical matter, the United States will be running on oil for the foreseeable future.
The BP closing was a reminder that the Alaskan North Slope, our largest domestic oil field, is on the downside of its useful life. Peak production was in 1989, and fairly or unfairly, the question was raised whether BP skimped on maintenance rather than invest in a diminishing asset.
The House and Senate, alert to the politics of oil prices, have separately voted to lift restrictions on offshore oil and gas exploration of 25 years’ standing. Each Congress, the lawmakers come closer to allowing oil and gas development of the Arctic National Wildlife Refuge. The House has already voted to do so, and the issue awaits the Senate’s return.
The trans-Alaska pipeline showed that oil can be drilled and transported in environmentally sensitive and climatically difficult regions, but it takes regulation, inspection and a vigilance over the industry that the Bush administration has shown little enthusiasm for.