‘Delivering America’s Energy Security’

By February 21, 2007Energy

Hot on the heels of us rolling out our “Energy Security for American Competitiveness” plan last week, the American Petroleum Institute (API) unveiled a complementary effort, “‘Delivering America’s Energy Security” at the National Press Club yesterday.

In fact, it was just last month that we moseyed on over to the Press Club for a small gathering of our association colleagues to hear from one of the deans of the association world, Red Cavaney, President of the API. At that lunch, he gave us a bit of a preview of their new effort. There are few industries that have been as buffeted by political winds as the energy industry and few industries that are as poorly understood — the latter which Cavaney readily admits is a daunting challenge. Something about the basic law of supply and demand that seems to elude the press, the public and the Congress.

Cavaney sounded the themes of efficiency, technology and diversity. Manufacturers lead the way in efficiency, of course, as we invent and make all the new efficient technology. As for “diversity”, it means diversifying our energy supply, a concept we favor as well. Some of Cavaney’s most salient and important points:

  • Global energy demand is expected to increase by more than 50% by 2030.
  • In that same time, the US is expected to consume 20% more oil and 19% more natural gas.
  • The energy industry has invested some $98 billion in technology — almost 20 times the level of the United States Government’s investment.
  • Among other advances, technology has allowed for more exploration from a smaller footprint — a point most relevant in places like the Arctic National Wildlife Refuge. (You’ll recall that ANWR is the size of South Carolina and the drilling footprint would be one-fifth the size of Dulles airport.) In 1970, a 20-acre site was required to hit a subsurface area of less than one square mile. Today, by comparison, some 80 square miles can be accessed below the surface from 2-acre drilling footprint.
  • Technology also now allows “4D” seismic imaging, with not only length, width and depth but also time able to be projected and tracked.
  • Today’s crude oil reserves in the US alone total 112 billion barrels — enough to power 60 million cars for 60 years and heat more than 25 million homes for the same period. Almost all of these reserves have been placed off limits by the US Government.
  • US natural gas reserves amount to 656 trillion cubic feet. This would heat 60 million homes for 60 years as well. Almost all of these reserves as well have been placed off limits by the US Government
  • As for the myth of “Big Oil,” the total amount of world reserves owned by state-owned companies is 80%. Only 6% is owned by “investor-owned” (i.e., capitalist “for profit”) companies.
  • This is an enormously capital-intensive industry. Cavaney figured that the cost of finding offshore oil alone — and tapping it — will cost upwards of a billion dollars. The new find in the Gulf of Mexico was some 28,000 feet below the surface — a discovery, Cavaney noted, that never would have happened without key tax law changes that encouraged exploration. This is an industry that shells out far more in exploration costs and in taxes than they do in profits.
  • We care about all of this, of course, as one of the biggest consumers of energy in the country, if not the biggest. As Cavaney pointed out, 96% of all manufactured goods have oil or gas in their lineage. We are on the front lines of the stiffest global competition the world has seen and our competitors don’t limit access to any of their natural resources. This all makes it harder for US manufacturers to compete. And, it’s something Congress can address today if they want. Or they can just go on making big pro-manufacturing speeches.

    One of the pillars of the NAM’s energy plan rolled out last week is to increase the public’s “Energy IQ,” as NAM President John Engler likes to call it. Red Cavaney’s efforts on behalf of API begin that process in earnest, but we have far to go. Let’s hope policy makers will be open-minded enough to get the facts before they rush in with more draconian solutions. The last boneheaded idea in the 80’s — the windfall profits tax — saw domestic production drop by 1.25 billion barrels (and saw most of the jobs go with it) and saw imports rise by 13%. Congress would do well to educate itself on the economics of the energy business and reject the “ready, fire, aim” approach that’s dominated the debate thus far.

    Here’s a link to Cavaney’s speech, here’s a link to his slides and here’s a link to their new website, unveiled yesterday as well, where you can find this information and much more. If we hope to educate our Members of Congress, we need to start by educating ourselves. We hope you’ll do your part to boost everyone’s energy IQ. Our work begins there.

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