Below are highlights from a testimony given by Erik Milito, Group Director of Upstream and Industry Operations, American Petroleum Institute, before the Senate Committee on Energy and Natural Resources Energy Supply Bill hearing.
“We are pleased to see the Senate Energy and Natural Resources Committee moving forward with a robust debate to move the country toward a comprehensive energy strategy. We are a nation truly need a comprehensive approach to energy shaped by reason, commonsense and experience, an approach based on competition in the marketplace and state of the art technology. As the committee considers the debates the pillars of infrastructure, supply, efficiency, and accountability, the US is well positioned to lead the world in the production of all energy sources, and particularly in the production of oil and natural gas. As both the US and global economies grow, the US, with its abundant supplies, can effectively provide economic and energy stability to domestic and global markets through continued and expanded development of oil and natural gas.
“Our nation can and should be producing more of the oil and natural gas Americans need here at home. This would strengthen our energy security and help put downward pressure on prices while also providing many thousands of new jobs for Americans and billions of dollars in additional revenue for our government.”
“US production growth has made all the difference. It has largely offset the loss from unplanned production outages around the world and put downward pressure on prices to the great benefit of American consumers and businesses.”
“Fundamentals of economics are quite evident in oil and gas markets, with growing US supplies putting downward pressure on the price of oil and natural gas. The Henry Hub price of natural gas has remained at US$6 /million Btu or less since December 2008, with most months since then with an average price in the US$2 – 4 range. Abundant supplies of natural gas in the US and the ability of US producers to efficiently produce these resources has led the EIA and other analysts to predict that natural gas prices will remain relatively low for many years. The low price of natural gas led IHS to conclude that the average household had US$1200 additional disposable income in 2012, expected to increase to US$3500 in 2025.
“Similarly, the price of crude oil has come down significantly. The spot price for West Texas Intermediate crude oil averaged US$95/bbl in January 2014. By December 2014 it was down to US$59, and in January 2015 it was at US$47. According to The Economist in its ‘Sheikhs vs. Shale’ article: ‘Cheaper oil should act like a shot of adrenaline to global growth…A typical American motorist, who spend US$3000 in 2013 at the pumps, might be US$800 a year better off, equivalent to a 2% pay rise.’ Affordable energy helps drive the economy, and affordability comes with increased access to US oil and natural gas supplies.
“The US energy boom has also been a catalyst to resurgent manufacturing and petrochemical sectors, which rely on low cost energy to fuel operations and on natural gas and natural gas liquids as feedstock for production. For example, the American Chemistry Council (ACC) identified 225 chemical industry investment projects valued at US$138 billion that have been announced as of March 2015. According to ACC, during peak investment years, these projects could support 383 000 jobs, US$266 billion in new economic output and US$19 billion in new tax revenue by 2023.”
“Globally, the change in energy demand is much greater, and when it comes to liquid petroleum products, the US competes on a global basis for these resources. Recent forecasts by the EIA estimate that sustaining a 3.6% annual growth in the global economy from 2014 – 2040 will require an expansion of about 28 million bpd in global oil supplies. That is an increase roughly equivalent to the current consumption of the US, Canada, Mexico and Japan. The growth in demand for natural gas worldwide is expected to be even larger, increasing by 64% from 2010 – 2040. Despite significant growth of renewable energy and improvements in energy efficiency, more than half the world’s energy demand will be met in 2040 by oil and natural gas, as is the case today.”
“We have a tremendous resource base with which to meet our growing energy needs. Based upon conservative estimates, we have enough oil and natural gas resources to fuel 93.7 million cars for 50 years and heat 66 million households for more than three centuries. And there is very likely much more oil and natural gas than previously known in areas where the industry has been unable to explore, and new technologies allow us to access resources previously thought unreachable.”
“The US Outer Continental Shelf (OCS) is estimated to contain some of the greatest quantities of undiscovered oil and natural gas resources. Unfortunately, the federal government has placed most of the OCS, approximately 87% of it, off limits to oil and natural gas development.
“The US has kept areas like the Atlantic off limits while our neighbours continue to move forward in an effort to develop oil and gas off their shores. Just to the North, Canada has secured tremendous economic and energy security advantages by developing oil and natural gas off the coasts of Nova Scotia, Newfoundland and Labrador, effectively reviving seaports that were considered near extinct, like the town of St. Johns. Also, Cuba and the Bahamas have both moved forward with exploratory drilling or development planning. And the rest of the Atlantic continues to seize this opportunity, including Norway, the UK, Venezuela, Brazil and Nigeria.”
Further highlights from the testimony can be found here.
Edited from testimony by Claira Lloyd