Fan Dance of the Oilmen

Fay Loren – Fan Dancer

The Department of Interior will be holding oil lease sales of tracts in the Gulf of Mexico (GOM). These sales were set up by the Biden administration under which, ironically, despite Biden’s push to pivot into more carbon-neutral energy sources, found the US producing more fossil fuels than ever before.

These leases were a product of West Virginia Senator Joe Manchin’s holding the sustainable energy goals of the “Inflation Reduction Act” hostage unless fossil fuel lease sales were offered up before any offshore wind leases were offered.

What is interesting about these GOM leases is that when they were first offered in 2023 they were greeted with a pretty lukewarm reception by the oil industry. This was due to the convoluted calculus of the industry, where the economics of supply and demand need to be figured into the projected returns from leases that will take $Billions to develop and perhaps a decade to complete.

Add to this the contorted shell game of the industry where these ‘future yield projections’ figure into their moment-by-moment stock value, you have a lot of moving parts.

Then, enter stage left: the Trump battle cry of “Drill, Baby, Drill,” promising to deliver more gas for cheaper prices at the pump to the fossil fuel consumers.

These additional squirrelly economic activities are giving the industry the heebie-jeebies. Last week (April 3, 2025) “West Texas Intermediate” (WTI) was running $72/barrel (bbl). This morning (April 8) it was $57/bbl. January 17 (the Friday before the inauguration) it was running $78/bbl.

The industry is in their element when prices are around $100/bbl. When it falls to $50/bbl. they close up shop. So having lease sales in a sinking market may not yield the promises of “Drill, Baby, Drill.” We shall see how these lease sales fare.

Why are we interested in the price of oil? Offshore oil development harkens in probably the noisiest industrialization activities in the ocean – with continuous seismic surveys, ship traffic from construction and product shipping, and all of the mechanics of sub-sea processing associated with extraction.

Dimes to doughnuts, my hunch is that these coming lease sales are not going to rock the market.