Jack Gerard answers your questions – Part One

In this week’s readers’ Q&A session, Jack Gerard, head of the API, the voice of the US oil industry, answers your questions.

In the first of two posts, he discusses the importance of energy efficiency, why drilling curbs should be eased and where the world will find new sources of oil.

In the second post, published above, he discusses peak oil, the potential of natural gas, and what the API’s lobbying achieves.

Next in the hotseat is Magued Eldaief, the head of GE’s UK energy business. He ill be answering your questions next Friday, January 21st. Send in your questions for consideration by the end of Sunday, January 16th to energysource@ft.com.

But for now, over to Jack:

Energy efficiency v security

We hear very little from the API about energy efficiency and oil. Yet we hear the term “energy security” often. Is US energy security really the API’s concern or is it simply feathering the nest of its members at the cost of the country’s best interests?
Lorne Stockman, research director, Oil Change International

Energy efficiency is a top priority for oil and natural gas companies. It reduces demand for energy, limits imports, and trims operating costs, which benefits both companies and consumers.

Because energy is a major cost input to oil and gas development, companies have long been mindful of using as little as possible. Our industry encourages all consumers to use energy more efficiently, and as a nation, we use about half as much energy to generate a dollar of GDP today compared with 1973.

As a nation, we use about half as much energy to generate a dollar of GDP today compared with 1973

Energy security is everyone’s concern, including the oil and natural gas industry. Producing more of our energy at home strengthens our energy security. More domestic production also helps grow our economy, create jobs, and increase revenue to our government. 

Deepwater drilling moratorium

Does dependence on imported oil at present levels, leave the US in a perilous defensive position world wide?  Does a seven-month moratorium on deepwater drilling make any sense strategically?
Stephen C. Lemonds

Oil is a global commodity, and the US will no doubt continue importing oil for the foreseeable future. True energy security lies in a diversified supply of oil from many countries.

Nevertheless, there are enormous opportunities for the US to produce more of the oil and natural gas it consumes, which could create thousands of US jobs and increase revenue to the government by billions of dollars annually.

That’s why we are disappointed by the severe restrictions that have been placed on offshore development by the government. Our offshore federally-controlled waters are rich in oil and natural gas resources. Other nations are developing their energy resources. We should be developing ours.

Opening up drilling

How much, if any, would we reduce our dependence on Opec oil by opening up drilling in the outer continental shelf, Alaska, etc?
Andrew Raulynaitis

More production at home could reduce imports, cut our trade deficit, and put downward pressure on prices, in addition to creating more jobs and revenue. It is difficult to quantify how much increased production would affect imports, but if companies had access to all US areas now off limits, a substantial increase in domestic production would be possible.

The important thing is to increase production and add supply to markets. Global demand for oil and natural gas is growing, and every producing nation should be investing in new development to help ensure future supplies are adequate.

New oil supply

It is clearly the view of the IEA that in order to keep crude oil output stable, the global upstream industry must find, develop and commission the equivalent productive capacity of a Saudi Arabia every five years, starting this year. Where is this oil?
Hugh Sharman

The IEA is right that demand is growing and we need to be investing in new supplies. Substantial amounts of oil are available in many places, including the US, which has shale oil reserves far outstripping Saudi Arabia’s conventional oil reserves, more conventional oil reserves than many people think, and enormous amounts of natural gas as a result of our ability to access shale gas.

Similarly, our biggest and most reliable source of imports – Canada – has enormous amounts of oil in its oil sands region. The reserves from these fields are second in size only to Saudi Arabia’s.

People have long predicted oil would run out, but their predictions have invariably proven inaccurate. Oil and natural gas remain plentiful, and technological advances have made more oil and natural gas accessible. They will be our principal forms of energy for decades to come, and, as the IEA itself has noted, they will be critical to providing economic growth and social improvement for developing nations.

People have long predicted oil would run out, but their predictions have invariably proven inaccurate

However, we live in an energy diverse world. We need all forms of energy, and US oil and natural gas companies are investing in virtually all forms.

Opec and $100 oil

Do you agree with Opec that “The world economy can stand $100 per barrel oil?” Is there any interest in selling domestically produced oil at below-world prices (but still well above drilling and shipping costs) to help break the back of Opec’s hold on prices?  If not, why not?
Veronica Gold

High crude prices can be a burden to national economies and to family budgets. More supply coupled with greater energy efficiency is the only sustainable way to bring oil supplies to consumers at more affordable prices.

While the Opec nations are among the world’s largest oil producers and major forces in oil markets, their announced efforts to restrict supplies have rarely been followed by disciplined action. The sale of oil is absolutely critical to their economies.

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