With a record number of investors registered and presenters scheduled, IPAA’s Oil & Gas Investment Symposium (OGIS) will take over New York City this April 16-18, 2012. Don’t miss out on what your colleagues are already registered for: IPAA’s OGIS New York!
Click here for the presentation schedule.
This past Saturday, former IPAA Chairman and President of Swift Energy Bruce Vincent appeared on ABC 13 in Houston to discuss the complex issues behind the rising price of gasoline – and what kind of energy policy can help alleviate the pain at the pump.
The interviewer began with this straightforward question: “There are a lot of misconceptions about what does and does not influence the price of gas. What is the number one thing that most Americans think that’s not actually true?”
Bruce answered promptly,“That the oil companies control the price of gasoline. The fact is about 70 percent of the gasoline at the pump is actually the price of crude oil which is really determined on the global market by supply and demand fundamentals primarily along with global interruptions and hotspots throughout the world.”
As Bruce noted, certainly the people who grow oranges don’t control the price of orange juice.
He also broke down the difference between short term fluctuations in both gasoline and crude oil caused by global disruptions like Iran threatening to close the Strait of Hormuz versus the longer term fluctuations caused by supply and demand issues.
“In this country we can do a lot with an energy strategy that gets the politics out of policy , gets the hyperbole and misrepresentations out of the conversation and deal with a long-term energy policy that advocates for the development of fossil fuels in this country.”
The oil and natural gas industry has been doing everything it can to grow oil production in the U.S. This amazing oil boom has been largely on private and state lands – not on federal lands where the federal government has jurisdiction. “If we had the government opening up federal lands, lowering the regulation burdens that the industry has and actually advocating and supporting the industry, this industry could drive production to even higher levels that would eventually bring lower prices for the American consumer.”
Check out the full interview on IPAA’s YouTube Channel.
Yesterday, through Declaration of Independents, IPAA released its analysis on the impact of market factors and energy policy on the hot-button political topic of gasoline prices. In particular, IPAA warned that this is “not a 5-second sound bite” and that many attempts to condense it to simple jargon actually ignore the complexities of the issue.
Part of the problem that complicates the increased oil production and lower gasoline prices relationship is the fact that the U.S. market is part of the global market – just like every other industry operating in this global economy. Interestingly, increased oil production actually does lower the price of crude oil on a regional basis. As a result of increased oil production in places like North Dakota’s Bakken shale play, “relatively abundant supplies in the mid-continent have in recent times put market prices for West Texas Intermediate (WTI) crude at some $10-$20/barrel cheaper than imported Brent crude.”
IPAA demonstrated how taxes on gasoline and burdensome regulations can harm producers and consumers, and how appropriate energy transportation infrastructure is a key component of a successful energy policy that promotes domestic development and eases supply issues.
Market Factors
Energy Policy
IPAA closed with the importance of an energy policy that “encourages the American oil production that has a direct effect on jobs, economic revitalization, and energy security.” Policies like Senator Robert Menendez’s bill, which targets five key tax provisions of the oil and natural gas industry unveiled a bill to target five key tax provisions of the oil and natural gas industry, is not a sound energy policy. This is in direct response to President Obama urging Congress to repeal what he calls “subsidies.” However, this is a gross mischaracterization. These provisions, particularly intangible drilling costs and percentage depletion are not subsidies at all – in fact, they are typical business deductions that all manufacturing and mining industries receive.
Killing these deductions would kill new projects – costing jobs and energy supply in the process. This is no way to help the gasoline price issue. Senate Majority Leader Harry Reid (D-NV) expressed his support for the bill and planned that the Senate will vote on it in the coming weeks.
As the analysis summed up, “hitting our nation’s energy producers hard with increased taxes and burdensome regulations will certainly make producing – and consuming – American energy more expensive. This results in lost jobs and investment in the American economy, makes us more reliant on foreign imports and increasingly vulnerable to an oil supply shock.” Please read the full analysis, complete with original maps and graphs, for more information.
This week, Obama will travel to four key swing states for the 2012 election, focusing on – you guessed it – energy. He’s starting off in Nevada and going to New Mexico, Oklahoma, and Ohio in the span of two days. The President has recently spoken in Florida, North Carolina and Maryland touting his record on energy. With the Achilles heel of his Keystone XL rejection, he has a hard case to prove.
In particular, the President has hammered the oil and natural gas industry – calling on Congress to eliminate the “subsidies” the oil and natural gas industry receives. Contrary to his rhetoric, the industry does not receive subsidies at all – but certain tax provisions that manufacturing and mining industries receive across the board. Repealing these deductions would result in a tax hike for America’s energy producers, which makes no sense in face of rising gasoline prices. As IPAA President Barry Russell recently said, “It’s a basic economic principle: If you want less of something, tax or charge more for it.” It would cut capital budgets of independent producers by at least 25 percent – which would certainly result in lost investment, lost jobs, and lost American energy.
In Oklahoma, interestingly enough, he’s checking out the southern leg of the Keystone pipeline in Cushing, Oklahoma – which TransCanada is constructing because it does not need Presidential approval.Again, the President is seeking to soften the public’s criticism for his handling of gasoline prices. But his rejection of the pipeline did nothing to help the bottleneck which has been building in Cushing, Oklahoma. As we wrote in our Declaration of Independents analysis a few weeks ago, “The pipeline’s construction would have been a significant boon to the regional infrastructure needed to loosen the growing crude oil bottleneck in the Midwest, caused, in part by the surge in Bakken crude oil production led by America’s independent producers.”
Above all, the administration’s policies have sought to federalize regulations on the oil and natural gas industry at every turn. In fact, new Energy Information Administration (EIA) numbers have confirmed industry’s claims that Obama’s energy policies have hampered access to federal lands. In particular, oil production from federal lands (both onshore and offshore) has fallen by 14 percent in 2011. Natural gas production fell by 11 percent.
Last week, IPAA Chairman Gigi Lazenby spoke to the Ohio Oil and Gas Association (OOGA) to discuss some of the administration’s regulatory overreaches. She countered Obama’s claims that oil is a “fuel of the past” – citing the amazing shale developments that are happening in Ohio and around the country. Also, Chairman Lazenby spoke about the job and economic benefits that have accompanied this development. Especially since 73 percent of Ohio voters favor more oil and natural gas development, President Obama has some explaining to do when he makes his final tour stop in Ohio.
This week, IPAA’s economic team broke down an often ignored region in global petroleum market: Latin America. In particular, our economists noted the increasing local demand and the increasing export competition from Asia and the implications those have on the global market.
China certainly has its hands in Latin America. Not only is the new Cuban rig made in China, the analysis notes that “China has or is developing ties in Colombia, Argentina, Ecuador, Bolivia, and others across the region. One major reason, of course, for Asian interest in Central and South American supplies is Asia’s own relative supply/demand deficit which has continued to expand as consumption in the region grows.” And Latin American exports are increasingly feeding Eastern voracious demand: “Exports from the region to Asia have grown from around 100,000 barrels per day in 2000 to somewhere around 1 million barrels per day more recently.”The analysis also tracks the developments in oil production in countries such as Colombia – which has incredibly doubled its crude oil production in the past five years.
Thanks in large part to the work of independent producers and the U.S. shale revolution, U.S. imports are decreasing. In fact, the only country from which we are importing increasingly more oil from is Canada – thanks to proximity and their inclusion in the shale revolution.
To read the full analysis and see more graphs, check out the Declaration of Independents page.
IPAA Leaders Meet with Senate Minority Leader Mitch McConnell
Last week, IPAA members gathered in Washington, D.C. for IPAA’s annual Call-Up to Capitol Hill. During the dinner at the Hay-Adams which kicked off the event, Jim VandeHei, executive editor and co-founder of Politico spoke about the polarized political landscape in Washington and the upcoming 2012 election. He believes that a GOP nomination does have a shot against President Obama, who he describes as having made few friends since he came to Washington – even on his own side. However, he believes it will be a difficult battle.
On Tuesday and Wednesday, IPAA staff leaders and members met with more than 170 Congressional offices, educating them on the critical policy issues facing the oil and natural gas industry. In particular, IPAA focused on three main messages: the jobs that America’s independent oil and natural gas producers bring to America; the devastating implications of repealing intangible drilling costs (IDCs) and percentage depletion; and the massive regulatory overreach that burdens the industry. Our members told their unique stories of job creation and the regulatory hurdles that they have to overcome in order to run their business. In more than 100 of these meetings, the team met with the legislator directly.
The meetings ranged from legislators and staff who were familiar with the oil and natural gas industry to legislators who were completely unfamiliar with the issues facing the industry. Some were champions of sound energy policy, some were sympathetic to the issues, and some pushed back. It truly emphasized the need for industry to educate Congress on these issues. After all, education of our lawmarkers is a foundation for a healthy democracy. Dan Naatz, IPAA vice president of political affairs urged IPAA’s member companies to meet with legislators back in their home districts, where they have more time and are especially eager to meet with constituents.
The Tuesday evening reception in the Capitol Building was also a huge success, with about 25 legislators and many Congressional staff in attendance and interacting with IPAA members. Thank you to those who participated. We encourage you to come to Washington for IPAA’s Congressional Call-Up. When all groups are represented and Congressional offices are presented with all the facts behind a lot of the politics in Washington, it gives the greatest chance for sound energy policy.
The tournament's benefactor, Schlumberger, will be cooking the golfers lunch this year.
The Independent Petroleum Association of America’s 18th Annual Texas Wildcatters’ Open is sold out! Thanks to our wonderful chairman, Don Crow, Lufkin Industries and the entire committee: Ron Barnes, Oil and Gas Asset Clearinghouse, David Culberson, Select Energy Services, Burk Ellison, National Oilwell Varco, Melinda Faust, Lantana Oil & Gas Partners, Tina Hamlin, IPAA, Bob Jarvis, IPAA, Russell Laas, Hart Energy, Richard LeBlanc, Norris Sucker Rods, C.W. MacLeod, Sanchez Oil and Gas, Suzanne Ogle, Regency Energy Partners, Dan Steele, Independent, and Amber Vasquez, Network International, Inc.
We are looking forward to a wonderful day filled with tons of food, door prizes (over 50 to be exact), and great networking opportunities. If you have secured a team and have not yet sent in the names of your foursome, email Brittany Green no later than Thursday, March 15. Also, if you are interested in providing goodie bag items that will be given to all players, fill out the goodie bag registration form and fax it to IPAA.
See you soon!
