The Valve Manufacturers Association held its annual Technical Seminar & Exhibits at the Hilton NASA Clear Lake in Houston, March 8-9. More than a dozen speakers presented on a variety of topics that centered around “Prevailing Challenges and Solutions for the Oil & Gas/Petrochemical Industries.” Following is the first of several articles highlighting some of these presentations.
At VMA’s 2012 Technical Seminar, keynote speaker John Felmy, chief economist of the American Petroleum Institute, Washington, DC, presented a series of oft-neglected or misrepresented facts about America’s energy policy. During his presentation, Felmy stressed how important it is for all members of the oil and gas industry to understand and get involved in developing a policy to accomplish the “energizing of America.”
The Price of Energy
Contrary to popular wisdom, Felmy said, oil and gas companies are not owned just by the corporate managers in these industries. In fact, the largest shareholders of oil stocks are pension funds, IRAs, mutual funds and, of course, private investors. That means that, when Washington points fingers to blame the energy industry for the country’s ills, it is, either by simple omission or by design, ignoring the fact that the energy industry is owned by millions of regular Americans and Canadians who depend on a return on their investment in oil and gas companies.
While most people don’t generally think of them in these terms, oil and gas are among the most technologically advanced industries in the country, accounting for 9.2 million American jobs and 7.75% of the GDP. Felmy said that even though it is fashionable to blame high gasoline prices on the producers, there are many other factors contributing to higher pump prices. Among those factors are exchange rate fluctuations, economic conditions, weather and, especially, geo-political conditions. For example, Libya is offline, limited supplies are being developed in some places and, as always, OPEC plays a big role.
Additionally, Felmy pointed out the position of the current U.S. administration has a great influence on prices and supply. He said, “The President says he’s going to double-down on new technologies, but you don’t double down on a losing hand.” He was referring to the actual returns on investment in renewable energy. “People say we need solar, wind, etc., but added all together, it’s just not going to do it!” In 2009, the total contribution of energy by renewable sources in the nation’s total consumption of 94.47 quadrillion BTU was 7.5 quadrillion BTU. That is only about 8%. So, according to Felmy, to invest huge amounts of money and political will in renewables at the expense of oil and gas is untenable. He noted that it took 90 years for oil to surpass coal for energy production, and wondered how long it would take for renewable to become a real factor in energy production.
Economy and Ecology
He continued: “I’m very concerned about the health of the economy. Reports from last month [February] are misleading. Looking at the jobs report, last month’s improvement really was a result of seasonal adjustment.” Yet, he said, the potential for good jobs in the shale gas and oil sands industries is being threatened because of increased regulation in many areas and a de facto ban in New York State. Additionally, activists and politicians are requiring the chemicals in fracing be divulged despite what Felmy says is a lack of evidence that fracturing has affected drinking supplies.
Felmy reiterated that America has a choice as energy policy is set for the next decade. By increasing oil and natural gas development, he said, more than 1 million jobs, $127 billion in additional revenue and 4 million barrels worth of oil and natural gas per day could be created, while voting to raise taxes on oil and natural gas would result in only 48,000 jobs, $29 billion in additional revenue to the government, and only 700,000 barrels’ worth of oil and natural gas per day.
He left the audience with this thought. “What’s our choice? Either reproduce the mistakes of the past or expand our production really quickly. We have vast resources – but only 13% are available for oil and gas development.”
What policies will be produced going forward will depend on the political will of the people and those they elect, and he encouraged everyone to help get the facts out to the general public.