Biden's oil & gas moratorium is expected to have long-term effects on Louisiana's economy

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The biggest long-term impact would be in the Gulf of Mexico, where drilling has been ravaged in recent years by low prices and reduced demand caused by the coronavirus pandemic, while the effect of the pause is expected to be minimal onshore because Louisiana has a relatively small amount of drilling happening on federal lands, said Eric Smith, associate director of the Tulane Energy Institute. Drilling on private lands is largely regulated by states.

Smith also foresees a potential hit to the downstream sector, where chemical plants and refineries depend on a stable supply of low-priced oil and natural gas as raw materials for the products they make and potentially would shift their oil needs to overseas sources if prices rise.

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As for downstream operations, Louisiana and Texas account for 16% of the nation’s crude oil refining capacity, 30% of the ammonia production and a large chunk of the plastics business, Smith said.

One-third of the products from Louisiana refineries are used in other states. “If you start screwing around with the delicate balance of production, then taxis aren’t running in New York,” he said.

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And Smith said depending how the regulatory changes are handled, it could have the same effect on Louisiana’s oil and gas industry as the offshore drilling moratorium put in place in the Gulf of Mexico after the Deepwater Horizon disaster in 2010. Because multiple permits are needed to drill for oil offshore from multiple federal agencies, there are a number of ways to shut down drilling.

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“This will be devastating to the oil and gas extraction industry,” he said. That includes businesses in Houma-Thibodaux that support activity at Port Fourchon. Port Fourchon services more than 90% of the deepwater oil production in the Gulf and is the base for the Louisiana Offshore Oil Port, which handles up to 15% of the nation’s domestic oil supply.

If the domestic crude oil extraction industry is crimped, then American petrochemical plants and manufacturers may be forced to turn to foreign petroleum in order to keep running.

“This may not have the effect of reducing consumption,” he said. “The global oil market may respond with higher prices and more sales for the Middle East and Russia.”

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