The United States continues to be a global leader in oil and natural gas production. However, foreign-owned refining capacity may limit future U.S. oil production growth.
Foreign entities have acquired significant U.S. refinery assets since the 1980s, and currently, about 30 percent of the country’s refining capacity is foreign owned. Many of these foreign-owned refineries have financial agreements that allow them to exclude domestically sourced crude oil. These foreign-owned entities can use these U.S. refinery assetsin a new strategy to capture market for their oil production and limit marketsfor U.S. production. Many experts believe the United States may double oil production by 2025, making our nation energy independent–but not if our oil has nowhere to go.
Rosneft, an oil corporation majorityowned by the Russian government, says it has the right to claim an ownership stake in the U.S. oil company Citgo Petroleum if Citgo’s parent company defaults on billionsin loans. Citgo’s parent company, the Venezuela state-owned PDVSA, pledged a 49.9 percent stake in Citgo to Rosneft as collateral for a $1.5 billion loan signed last November. The credit rating agency Fitch reported in January that a default at PDVSA is probable. A default will leave the door open for Rosneft to seize the promised stake in Citgo, a company with U.S. holdings that include three refineries and three pipelines. If that claim succeeds, Rosneft will own 49.9 percent of a company that is among the United States’ 10 largest petroleum refiners.
Russian ownership of a large portion of a U.S.-based oil company is unprecedented. The United States has a clear national interest in achieving energy independence. The loan agreement between Russia and Venezuela involving Citgo refineries, pipelines and terminals presents a clear threat to U.S. energy security. This agreement may give Russia clear control over the sixth-largest refinery in the United States, the ability to impact Americans’ gasoline prices and a strategic advantage over the country’s geopolitical freedom of action.
The White House has the power to block the deal on national security grounds. When foreign companies make major investments in American properties, each side is expected to voluntarily file a notice with the White House committee known as the Committee on Foreign Investment in the United States (CFIUS). CFIUS is a nine-member interagency committee, chaired by the U.S. Treasury Secretary, that reviews the national security implications of foreign investments in U.S. companies or operations. There have been cases in which foreign state-operated companies have withdrawn their bids because of political pressure. In 2005, the Chinese state-owned oil and gas company CNOOC cancelled its $18.5 billion bid for U.S. oil company Unocal after members of Congress sought to extend CFIUS’ review of the case. Many experts expect the Rosneft transaction would meet similar, if not stronger, opposition.
In April, U.S. Representatives Jeff Duncan, R-S.C.. and Albio Sires, D-N.J., asked CFIUS Chairman and Treasury Secretary Steven Mnuchin to investigate the deal. Duncan and Sires are the top members of the U.S. House Committee on Foreign Affairs’ Western Hemisphere subcommittee.
U.S. oil companies have struggled in a low-price market environment during much of the past two years. The low price environment’s ripple effects have affected employment, tax revenues and economic growth across the country. Oil producing companies acrossAmerica have refocused their capital expenditures and are strategizing their way out of this downturn.AsAmerica continues our march to energy independence, we do not need limitations on our domestic oil production markets.
Edward P. Cross is president of the KansasIndependent Oil & Gas Association
Debate continues across the country on our nation’s energy future. The competing visions, however, are not just philosophical arguments. There are real differences between these two visions and their outcomes on our economy, on consumers, and on our way of life.
On one hand, we have today’s energy reality in which the U.S. leads the world in production of oil and natural gas and consumers enjoy almost unprecedented energy security. Drivers saved more than $550 at the pump in 2015, while lower costs for energy related products and services boosted household budgets by $1,337. The overwhelming majority of Americans support policies to maintain U.S. energy leadership. This pro-energy vision means energy from all sources, including oil and natural gas, generate economic growth and reduce carbon emissions.
While 80 percent of American voters support increased U.S. oil and natural gas production, a vocal minority of extreme environmental activists work to obstruct energy development and infrastructure projects, reducing our energy options under a false belief that oil and natural gas production and use are incompatible with environmental progress. Their vision is one of constrained energy choices, with less certainty and reliability, and with less assurance on affordable power.
What would happen if we halted new oil and gas leasing, banned hydraulic fracturing and stopped permitting energy infrastructure? A recent study using the Energy Information Administration’s economic model and base case inputs revealed freezing the American energy revolution means the average American household could see its costs jump $4,550 by 2040 due to increased costs for transportation fuel, electricity, home heating, and goods and services.
Stopping the American energy revolution would take us back to last century’s era of energy dependency. The U.S. economy would lose a projected 5.9 million jobs. Only twice in the past 70 years has the U.S. unemployment rate exceeded 8.2 percent. But the vision of extreme environmental activists would take us there again, plunging the economy into persistent recession-level unemployment throughout 2020 to 2040. Lower U.S. energy production and higher energy prices could reduce cumulative GDP by $11.8 trillion. That is a stark contrast to today’s world, in which U.S. energy leadership is generating important economic benefits for American families and businesses.
Extreme environmental activists would not only erase, but reverse, all those gains, taking the U.S. back to an era of energy dependency — all based on the false idea we must choose between energy security and environmental progress. In reality, the U.S. leads the world in reduction of carbon emissions and in production of oil and natural gas. The U.S. emitted 23 percent fewer energy-related carbon emissions in 2015 than 2005. Carbon emissions from power generation have plunged to nearly 30-year lows primarily because of greater availability of natural gas. In fact, more than 60 percent of the carbon reductions in the electric power sector from 2005 to 2016 have been the result of fuel switching from higher emission generation to natural gas generation.
Even under the most optimistic scenarios for renewable energy growth, oil and natural gas will supply 60 percent of U.S. energy needs in 2040. What’s more, projections show worldwide energy consumption will increase by more than 38 percent by 2040 and 67 percent of that will be met by fossil fuels.
The oil and natural gas industry has proven that during the long-term, it is possible to lead in energy production and in environmental stewardship. Those are the facts.
Contrary to claims from extreme environmental activists, cutting U.S. oil and natural gas production would not magically reduce world energy demand. But it could raise costs significantly for American families and manufacturers, profoundly damage the U.S. economy, diminish our geopolitical influence and severely weaken our energy security. That’s where extreme environmental activists strategies lead, and it is not a path most Americans want to take.
We should set aside the acrimony and division that has marked too much of past national energy policy discussions and work together as one nation on a positive forward-looking energy future based on the understanding that our nation’s best energy future can only be achieved through a true all-of-the-above energy strategy. With forward-thinking energy policies, we can ensure the U.S. energy revolution continues to provide benefits for American consumers, workers, and the environment.
Edward Cross is president of the Kansas Independent Oil & Gas Association.
It is no secret that the Texas economy is closely tied to the oil and gas industry.
And, it is no secret that the economic health of the oil and gas industry is tied to the price of crude oil.
And, it is no secret that the price of crude oil is tied to the relationship between the supply and demand of oil.
And, it is no secret that the Organization of Petroleum Exporting Countries (OPEC) is the major supplier worldwide.
And, it is no surprise that Saudi Arabia, the world’s largest exporter, is the key OPEC member. That is why oil traders, who buy and sell crude oil across the globe, watch and listen to Saudi Arabia’s.
Last week, Saudi Oil Minister Khalid al-Falih said, “OPEC will do whatever it takes to rebalance the global oil market.”
OPEC members will meet May 25 to discuss oil production quotas. He expects OPEC to extend its 1.2 million barrels per day (bpd) production cut another six month to the end of 2017. Eleven other oil exporters have agreed to reduce production another 600,000 bpd, which includes 300,000 bpd from Russia.
The reductions were implemented in January, and have been effective in reducing worldwide supplies somewhat, according to the International Energy Agency (IEA). Global oil output has fallen 800,000 bpd in 2017 compared to last year, IEA stated, which is short of its 1.8 million bpd goal.
There have been some reports that while oil production declines from OPEC members have occurred, some countries have been exporting oil they have in storage, circumventing the goal to reduce oil supplies worldwide.
Compliance with the production cuts by OPEC members is another concern. As oil prices increase, producers are temptated to exceed their production quotas. Historically, OPEC members have not been able to abide by the group’s production quotas. However, OPEC, under the leadership of Saudi Arabia, established an oversight committee with the purpose of monitoring activities of producers and reporting discrepancies at its May 25 meeting.
Another issue has been the rise in production in the U.S., which has increased from 8.5 million bpd in October 2016 to 9.3 million bpd currently.
IEA also said that worldwide demand will increase because refineries have completed maintenance and retrofitting in preparation for the summer driving season. IEA predicts world oil demand to increase 1.3 million bpd this year.
Closer to home, the Energy Information Administration (EIA) at the Department of Energy reported Wednesday that domestic crude oil supplies dropped by 5.2 million barrels for the week ending May 5. Also, gasoline stockpiles declined by 200,000 barrels, and distillate stockpiles were down 1.6 million barrels.
The decline in inventories prompted a $1.43 rise in crude oil price on the NYMEX to $47.33 on Wednesday.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
Crude oil is entering another period of uncertainty as producers in the U.S. continue to increase exploration while OPEC nations and Russia try to maintain their pledge to reduce their oil production by 1.8 million barrels per day.
Crude oil prices on the New York Mercantile Exchange (NYMEX) closed below $50 per barrel on April 24 for the first time since May 29.
Traders worldwide are trying to sort it all out, but a key factor is OPEC’s decision to continue its six-month agreement to reduce its oil production, which expires June 30.
Also, drilling and production in the U.S. has increased for 14 consecutive weeks. U.S. oil production is 9.3 million barrels per day, up almost 10 percent since mid-2016.
OPEC’s monitoring committee oversees compliance with the collective production cuts, and it has endorsed a continuation of the production decrease for another six-months, which is a strong indication that OPEC will approve the committee’s recommendation at its next meeting in May.