American Petroleum Institute Adviser: U.S. Energy policy must include oil and gas

Smart energy policy does not exclude resources, especially if the exclusion comes at the cost of the country's flowing resources, according to Rayola Dougher, senior economic adviser for the American Petroleum Institute.

Dougher attended the Shreveport Rotary Club luncheon Tuesday to speak about current and potential U.S. energy policy and the state of the oil and natural gas industry. Her remarks focused on the industry's position on American energy.

"The investments we make or fail to make really affect the well-being of our people," Dougher said. "But you hear a lot of nonsense from both sides, and it's hard to sort out."

Energy policy matters and, properly tempered, has the ability to free the nation from its need for foreign oil, according to API.

"Within 12 years, American and Canadian energy supplies could provide 100 percent of U.S. liquid fuel needs with increased biofuel development and the implementation of four straightforward policies," according to API.

Those policies include providing access to U.S. oil and natural gas reserves currently off limits, returning Gulf of Mexico permitting rates to pre-moratorium levels, resisting calls to impose new regulations and partnering with Canada on crude exporting projects like the Keystone XL pipeline.

In 2011, 52 percent of U.S. crude oil and petroleum products came from the Western Hemisphere and 22 percent came from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia and United Arab Emirates, according to the U.S. Energy Information Administration.

The nation's largest sources of net crude oil and petroleum product imports were Canada and Saudi Arabia. U.S. dependence on imported oil has declined since peaking in 2005, according to the EIA.

Dougher said there are, generally speaking and not surprisingly, two camps — those who believe oil and gas are the energy providers of the past and those who believe its true potential is still looming on the horizon.

For the first camp, Dougher addressed several common complaints about the oil and gas industry.

High prices at the pump, she said, are mostly defined by the price of crude oil — at least 65 percent of the cost per gallon — and generally out of the control of policy makers.

The United States became a net exporter of oil in 2011, the first time since 1949. Those exports, a result of lower demand, higher production and the national recession, pumped about $107 billion into the nation's gross domestic product, Dougher said.

Total U.S. oil and liquid fuel consumption fell 1.8 percent last year, according to EIA. Vehicle consumption, the largest portion of usage, shrunk by 2.9 percent. In the first quarter of 2012, total consumption fell by 3.5 percent from the same period last year. The United States is the world's third largest producer of crude oil at 9,688 barrels per day, according to API. Only Saudi Arabia, 10,521 barrels per day, and Russia, 10,146 barrels per day, outpace the United States. China, the fourth largest, only produces 4,273 barrels per day.

Dougher said oil and natural gas earnings, despite common perception of high profits, are typically in line with the average for other U.S. manufacturing industries. She said investments and capital expenditures reduce the industry's profit margins much more than computer or pharmaceutical manufacturers.

As for a future powered by green energy, Dougher said "right now it's not, and won't be for the foreseeable future. We're going to need all the energy we can produce."

Though the United States only maintains two percent of the world's oil reserves, she said the term is often confusing. Oil reserves only account for drilled, ready but unused resource plays. Conventional U.S. oil and gas stores are at least 18 percent of the world's supply, even without shale activity.

More than 85 percent of the country's offshore acreage of oil and gas supplies are off limits to drilling and have been since the 1960s, Dougher said.

"That's time enough," Dougher said. "Within a decade, that could bring 1 million barrels a day onto the market."

Dougher said Americans have expressed their desire for greater drilling activity in the country, but the effort continues to meet stiff resistance from policy makers.

"We have not yet been able to translate that will into political policy," Dougher said. "But the people want more production."

Louisiana produces 10 percent of the country's energy, Dougher said, and is the No. 1 producer of oil and the No. 2 producer of natural gas. She said the natural gas glut will end eventually, and prices will rise — when is just a matter of time.