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Q&A Part 2: State of American Energy 2015

Hydrocarbon Engineering,

Below are further highlights from a press conference held by the API where Jack Gerard answered questions on the 2015 State of American Energy. For Part 1 click here.

How can you make an argument that if we now export American oil, those prices will fall? They’ve already fallen.

“Well, back to the fundamentals, it boils down to the laws of supply and demand. The more supply you put into the marketplace, the more downward pressure you put on the price. The reality is that increased supply as on the part of our domestic production here in the US, coupled with what's going on globally, is what’s putting downward pressure on the price of crude oil that’s brought essentially to the 1950s today. My simple point is this, as we look at crude oil exports, it allows us as producers here in the US to expand our production to other markets around the world while at the same time putting additional supply into that same marketplace that’s putting downward pressure on the price. It only stands to reason, back to the point of logic, all the major analysis done today, regardless of political or philosophy, have all concluded that ultimately crude exports will lead to lower prices of gasoline at the pump in the US. That’s Brookings Institute, That’s Larry Summers, that’s GAO, that’s a variety of other government reports. They all conclude the same because it comes back to the fundamentals of supply and demand.”

I’m wondering if API sees climate change first as a problem. And if so, how do you reconcile that problem with your goal of increased oil production?

“I think it’s a very important point because if you look at where we are today, we’re at a 20 year low in our carbon emissions in the US. And why is that? It wasn’t a government mandate, it wasn’t a government legislation; it was driven primarily by the consumption, increased consumption of cleaner burning natural gas that was made possible by the American energy renaissance that we have in the US today producing these volumes, increased volumes of cleaner burning natural gas. That’s what has gotten us to where we are today in bending the curve, if you will, in terms of the amount of carbon that’s being released.

“Let me also add, as I did mention in my prepared text, our industry today is the leader in seeking zero carbon emitting or low carbon emitting technologies. We have invested as an industry more than the federal government has in seeking these new technologies to reduce or stop the emissions of carbon. In addition, when you add everybody else’s investments together, they’re equal to about what we have done as the oil and gas industry. So, we take second seat to no one in working on and addressing the carbon challenge.

“People have different views within our industry as to how that should be addressed. Some talk about carbon tax, some talk about cap and trade, et cetera. But we think one of the things this administration, this Congress should focus on is looking at the reality of what the American energy renaissance has done for us. As we brought cleaner burning natural gas to the marketplace, it’s lowing our emissions. What would that mean if our vision is to export in abundance that cleaner burning natural gas around the world and begin to see the same effect on a global scale, because this is a global challenge.”

Could you talk a bit more about the specifics of the change that you’d like to see for oil exports? Could you talk about what specific changes you’d like to see the President make to start off with, and then Congress?

“Well, without getting too far in details, and I get my experts if you want to do a real deep dive on it. But the two approaches to date we need to think about are with the administration, of course, with the Congress. You hare Chairwoman Murkowski, she’s already talking about the need to have hearings to further education to address, frankly, many of the questions that we’ve been having here today. What does it really mean for consumers? What does it mean for the price of gasoline? What does it mean for domestic production, et cetera? So, I expect over the next many months Chairwoman Murkowski and probably leadership in the House, as well, will have informational hearings, bringing experts to talk about these issues. But as the Congress ultimately addresses the crude export ban, and I believe eventually we need to legislate a solution to it so it has long term impact, long term vision. The administration also has authority currently, existing authority, to license and approve some of the exports of crude.

“So, as I mentioned in my remarks, one of the president’s initiatives he’d like to see over the next two years, I believe he talks about it as doubling the amount of export or the trade we have lowering our trade imbalance. Energy is a good place to look; it’s a ready made opportunity. So, if we focus on things like LNG exports, like crude oil exports, we’ve got a real opportunity here to achieve that broader trade vision while at the same time putting our people to work producing the very energy that we’re sending into those global marketplaces. It’s a win/win across the board for everybody. And so, we believe both the administration and the Congress should lead this effort in a collective way, but realising they each have different responsibilities in the short term to address the issue.”

Edited from transcript by Claira Lloyd

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