Energy Institute's Harbert Comments On Oil, Gas Imports

February 28, 2011

Portfolio.com

Kent Hoover

Gasoline prices already were high for this time of year, but the disruption of Libyan oil exports has caused the average price of regular gasoline in the U.S. to jump nearly 12 cents in the past three days, to $3.29 a gallon.

That’s according to AAA’s daily survey of prices at the pump.

As the weather warms and Americans drive more, that price could creep up to $4 a gallon, or beyond, depending on what happens to world oil supplies.

These higher gasoline prices will squeeze both consumers, who will have less money to buy other goods and services, and businesses, who will try to pass along their additional transportation costs to their customers. That’s not what a still-recovering economy needs.

The oil shocks of the past week have prompted many business groups to call for increased oil production in the U.S.

Yesterday, the Energy Security Leadership Council, a group co-chaired by FedEx chairman and CEO Fred Smith, renewed its call for increased domestic oil production. Dependence on foreign sources of petroleum poses both an economic risk and a national security risk to the country, the council maintains.

“The country has to mobilize and take some action to finally address this problem, which has been going on now for an awfully long period of time,” Smith said.

Smith’s group isn’t looking to increased domestic oil production as the only solution to making America energy-independent; it also proposes electrification of short-haul transportation fleets and wants the federal government to help build the infrastructure to make that possible. T. Boone Pickens, chairman of Dallas-based BP Capital Inc., thinks the nation’s trucking industry should convert to natural-gas vehicles.

For now, however, we’re stuck with cars and trucks that depend on gasoline and diesel fuels.

“Despite advances in alternative energy, the trucking industry will continue to depend on traditional diesel fuel for the foreseeable future,” said Rick Moskowitz, vice president of the American Trucking Associations.

The trucking industry spent more than $101 billion in diesel fuel in 2010, up 28 percent from 2009. Truckers already were expecting to pay 20 percent more for diesel this year before the recent spike in crude oil prices.

“Fuel is our members’ second-largest expense, so uncontrollable spikes cut right at their bottom line,” he said.

Plus, they’ll soon have less freight to haul “as consumers spend more on energy and are forced to reduce their spending on other consumer goods,” Moskowitz said.

ATA called on the Obama administration to open more areas in the U.S. to oil drilling, including the Outer Continental Shelf.

The U.S. Chamber of Commerce agrees, saying the launch of a new initial well-containment response system makes deepwater drilling safer, so the administration should allow drilling to resume in the Gulf of Mexico.

“As a result of the administration’s de facto moratorium on drilling in the Gulf last year, the U.S. sent $72 billion more to foreign countries for oil and gas imports in 2010 than we did the previous year,” said Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy. “America must become more self-sufficient, not less.”

Alaska Governor Sean Parnell said his state is ready to help, if the Obama administration will let it. Alaska currently accounts for 11 percent of U.S. production. It could produce a lot more oil if government agencies would end delays in in leasing oil fields and permitting new wells and open more areas to drilling.

Areas the size of America’s East Coast already are off limits in Alaska, “yet Interior is shopping for more,” Parnell said.

“This is the moment our government must examine its ‘no new wells’ policy,” Parnell said today during a speech at the National Press Club.

The Alaska Wilderness League hopes the Obama administration doesn’t listen to Governor Parnell. His call for oil exploration in the Arctic Ocean, for example, is reckless, as evidenced by a recent accident in Norway, where a tanker ruptured and 200,000 gallons of fuel oil were spilled in the water. Cleanup crews couldn’t get to it because of ice.

That’s a “tiny taste of what would happen in the arctic,” if oil companies were allowed to drill there, said Emilie Siurrusco, the league’s communications director.

Plus, increasing domestic production of oil might not lead to lower gasoline prices, she said. Oil produced in the U.S. goes into the world oil market, and Saudi Arabia could ramp down its production as we ramp up ours in order to keep prices high.

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