Below are highlights from the testimony given by Graeme Burnett, Senior Vice President of Delta Air Lines and Chairman of the Board at Monroe Energy to the House Energy and Commerce Committee’s Subcommittee on Energy and Power at the 21st Century Energy Markets hearing.
“The impact of lower fuel prices upon consumers and the economy cannot be overstated. My fellow panellist, Adam Sieminski of the US Energy Information Administration, noted in a recent speech that the EIA has projected the average American household will spend about US$750 less on gasoline in 2015 compared to the prior year. Taken together with lower home heating oil costs, some American households stand to save as much as US$1500 this year from lower fuel costs. As reported in The Washington Post at the end of 2014, across the country, American motorists saved US$630 million on gasoline compared with what they were paying at the beginning of last summer. The article further estimated the total windfall to the American consumer could top US$230 billion in 2015.
“These savings on fuel go straight back into American consumer’s pockets, allowing them to use that savings in more productive ways, such as on goods and services, whether that’s groceries, clothing, household goods, and on and on. That consumer activity stimulates the economy broadly.
“Reports from Goldman Sachs and the American Enterprise Institute have characterised lower fuel prices as equivalent to an enormous, broad based tax cut, worth billions to consumers. As Dean Maki, Chief US Economist at Barclays, noted, when oil prices fell, the benefit to consumers outweighs any loss to producers. Investment in oil and gas production is still less than 1% of gross domestic product. That pales next to consumer spending, which is 68.5% of GDP. Hence, current crude oil export policy has broad based economic value.”
Why would any policy maker want to risk jeopardising the current consumer benefits we are experiencing and institute a policy that would benefit only a narrow sector of the economy?
“Should Congress eliminate restrictions on crude oil exports, lawmakers risk not only hurting the US consumer, but also, and more importantly, endangering energy security. Energy security is not just about producing enough feedstock, that is crude oil, for the nation’s needs, but also about maintaining the domestic capability to transform that feedstock into the products we consume here in America. Losing American refining capacity would take us further away from energy security.
“Repeal of current law would mean domestic crude oil producers will have the ability to ship oil to refineries in Europe at a lower cost compared to delivering the same oil to refineries located on the East Coast of the US. This would render domestic refineries, particularly in the Northeast, unable to compete with foreign refineries. Put simply, lifting the ban will benefit European refinery workers at the expense of thousands of American jobs while endangering US refining capacity that is critical to our national security.”
“A myth I wish to dispel is that allowing exports will reduce OPEC’s influence. It is important to remember a very key point: the crude oil market is not a true free market. The long term, well documented level of control over crude oil markets exhibited by national oil companies and the OPEC cartel virtually eliminates any claim that such markets are free or open.
“With its market power, OPEC alone effectively influences 35% of crude oil production and supplies worldwide, impacting pricing through quotas and other controls, including access to crude oil. Saudi Arabia’s decision not to cut production and allow prices to crash, in order to maintain market share and reduce non-OPEC production, such as US shale oil, clearly demonstrates that they are the controlling factor for crude price. Furthermore, a recent publication by BP shows that OPEC will ride out the threat from US shale and ultimately raise its market share over the next two decades.”
“Keeping US crude oil in America benefits American s in the broadest way possible, impacting both families and businesses. The current export restrictions have helped keep prices for petroleum products lower than they otherwise would have been. And the law has ensured a robust refining sector and helped preserve refining expertise here in this country. Our nation’s economic and security interests are best served by allowing American refiners to add value to crude oil here and becoming less reliant on higher cost foreign crude from unstable places like Libya, Nigeria, Venezuela and the Middle East.
“As they say in the medical profession, first do not harm, the burden of proof lies with those who would seek to alter a longstanding pillar of our nation’s energy security policy.”
Edited from testimony by Claira Lloyd
Read the article online at: https://www.hydrocarbonengineering.com/refining/10032015/21-century-energy-markets-delta/