As our nation cautiously reopens and our economy begins to recover from the COVID-19 pandemic, the thought of a summer road trip has never seemed sweeter. Just having the freedom to take to the road and explore our beautiful country has an exciting, renewed significance for many of us right now. Once we get the green light and before our journey begins, however, we'll need to fill up our gas tanks.
Louisiana's offshore oil and gas industry provides fuel that makes our trips possible, as well as hundreds of thousands of well-paying jobs that fuel our local, state and national economies. Now, the industry needs help to survive and continue to fuel our nation and economy long after this crisis has passed.
The COVID-19 pandemic brought the global economy to its knees this spring, shuttering businesses, suspending travel and cutting worldwide demand for oil and gas to the lowest levels in modern history at a time when production levels were surging. U.S. crude oil production was, in fact, at an all-time high in early 2020, breaking records and contributing to our nation's new role as a net oil exporter. Louisiana's local companies and infrastructure have supported the production of nearly 20 percent of America's oil supply, 45 percent of U.S. petroleum refining and 52 percent of our nation's natural gas processing.
Then, that historic peak seemed to evaporate overnight as the pandemic extended its reach, demand began to drop, and a price war between Saudi Arabia and Russia contributed to a glut in the oil supply. We watched oil prices plunge to less than $20 a barrel and analysts predict a 20-percent decline in global oil demand in 2020, still too much for a 10-million-barrel-a-day OPEC production cut to overcome. Global oil storage reached its capacity.
The impact on Wall Street has been devastating, but the impact on America's future domestic oil supply is even more alarming. This economic crisis truly threatens the survivability of our strong domestic offshore oil and gas industry, thousands of small businesses who service offshore production, and the hundreds of thousands of men and women whose jobs are linked to oil and gas production. We must save America's offshore oil and gas industry.
On April 2, LMOGA appealed to President Trump to implement measures to help domestic oil and gas producers and local businesses survive the crisis by putting them in a position to recover and continue fueling our nation and the world once demand and supply stabilize. Without emergency policy measures, producers may have no choice but to shut in wells, accelerate layoffs and cancel contracts totaling millions of dollars with local service companies. Without preemptive federal action, the economic domino effect will be long and brutal, and our future domestic energy supply will be at risk.
One of the measures promoted by LMOGA is the temporary reduction or suspension of royalty payments on federal offshore leases to ensure a robust energy industry remains viable during and after the current crisis. A viable industry is not only good for the economy and our energy supply, but for coastal restoration as well, because production generates federal funds for restoration projects. The U.S. Secretary of Interior has authority to reduce royalty rates for economic purposes, and LMOGA has strongly advocated that President Trump, Secretary of Interior David Bernhardt and Congress make this temporary cut to boost production and future royalty revenues.
LMOGA requested actions including a three-year extension on federal leases in the Gulf, extensions for decommissioning wells, and the protection of pipelines and other infrastructure if limits to storage capacity necessitate well shut-ins.
I am convinced that our global economy will rebound once the pandemic threat has diminished, and then demand for oil and gas will soar. We need to ensure our domestic offshore oil and gas industry survives to meet tomorrow's challenges and continues to fuel our gas tanks, the national treasury, and jobs for men and women everywhere for decades to come.
For more information about Louisiana's oil and gas industry and LMOGA's work to protect and grow the industry, visit www.lmoga.com or call (225) 387-3205.
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