Energy Tomorrow RSS Feeds: Economy

Energy Taxes - 6/5/2009 3:08:51 PM

Fri, 05 Jun 2009 15:08:51 -0500

Congress is considering at least $400 billion in new taxes and fees on the oil and natural gas industry, which were proposed earlier this year in President Obama’s fiscal 2010 budget.

Raising taxes in a time of economic decline is a recipe for disaster—placing the economic burden on hard-working Americans and their families. Higher energy taxes that reduce production and increase costs will take money from every American household:

New taxes kill jobs. With America in the midst of a deep recession, new taxes could hurt workers by extending the recession or depressing job creation just as an economic recovery starts to bloom.

New energy taxes would be especially difficult for the 1.8 million workers directly employed by the oil and natural gas industry who work hard to bring energy to America’s homes, factories, hospitals and cars. These workers include welders, electricians, truckers, gas station attendants and small business owners.

Another 4 million workers indirectly depend on the oil and natural gas industry for their jobs. More taxes would put those jobs and others throughout the economy in jeopardy.

Millions of Americans are watching their retirement savings shrink. Billions in new taxes on U.S. oil and natural gas companies will hurt millions of Americans whose retirements depend on mutual funds, pension and retirement plans that own oil company shares.

Plans to strengthen America’s energy security would be undermined since higher taxes would lead to less—not more—domestic oil and natural gas production. All reputable forecasts show that oil and natural gas will be required to meet the majority of America’s energy needs for decades to come. The International Energy Agency and the highly-regarded Cambridge Energy Research Associates (CERA) both have warned recently that failing to invest in oil and natural gas development could lead to future price shocks. The additional tax burdens would make it more difficult for companies, already faced with sharply lower oil and natural gas prices, to make long-term investments.

There is a better way than saddling a troubled economy with new taxes that hurt American families. The oil and natural gas industry should be allowed to develop the vast energy resources that belong to the American people. It would improve America’s energy security, create jobs and grow federal, state and local tax revenues. In fact, a recent ICF International study found that developing the vast domestic oil and natural gas resources on federal lands that had been kept off-limits by Congress for decades could generate $1.7 trillion in government revenue.

The bottom line is that what happens in the oil and natural gas industry reverberates throughout the economy. Click here to see what energy taxes would mean to your state.

In outlining their agenda for energy and the environment, the administration has declared that they want to reduce America’s dependence on foreign oil by creating millions of new jobs in the energy sector, encouraging the development of renewable and alternative sources of energy and promoting the responsible production of domestic oil and natural gas resources. The oil and natural gas industry agrees with this approach.

Unfortunately, recent actions don't match the rhetoric; and too often the rhetoric is used to confuse the reality of America's energy challenges.

Tell Congress to oppose these increased taxes and fees on the industry. Take action and send a letter today.

Untapped U.S. Oil and Gas Resources Study - 6/5/2009 1:08:50 PM

Fri, 05 Jun 2009 13:08:50 -0500

The development of America's vast domestic oil and natural gas resources that had been kept off-limits by Congress until recently could generate more than $1.7 trillion in government revenue, create thousands of new jobs and enhance the nation’s energy security by significantly boosting domestic production, a new study shows.

The ICF International study, commissioned by the American Petroleum Institute (API), shows that developing the offshore areas that had been subject to Congressional moratoria until recently, as well as onshore areas—resources in Alaska's Arctic National Wildlife Refuge and a small portion of currently unavailable federal lands in the Rockies—would lift U.S. crude oil production by as much as 2 million barrels per day in 2030, offsetting nearly a fifth of the nation's imports. Natural gas production could increase by 5.34 billion cubic feet per day, or the equivalent of 61 percent of the expected natural gas imports in 2030.

The study also estimates that the development of all U.S. oil and natural gas resources on federal lands could exceed $4 trillion over the life of the resources.

"This study underscores how the oil and natural gas industry can enhance America's energy security and help solve our economic problems by increasing production of our nation’s vast oil and natural gas resources," said API President and CEO Jack N. Gerard. "The U.S. oil and natural gas industry supports more than six million jobs, and more drilling for oil and natural gas will mean more energy for America, more well-paying jobs, and trillions of dollars of much-needed revenues that will help federal, state and local governments pay for critical services."

According to the ICF study, U.S. crude oil production would rise by 36% by 2030 if development is permitted in the studied areas of the Outer Continental Shelf, ANWR and the Rockies and domestic natural gas production would rise by 10%. By 2030, this activity would create 160,000 jobs.

Take action now. Contact your congressman today to say you support more access to energy resources here at home.

For more results, read the final study report (.pdf).

A Matter of Scale - 5/29/2009 11:24:51 AM

Fri, 29 May 2009 11:24:51 -0500

The oil and natural gas industry is one of the largest in the world. To compete in the global marketplace and secure America’s position in the energy race, our companies must remain sizable and strong.

When it comes to industry earnings, however, the profits are sizable – but that merely reflects the size of the industry – not the financial performance of oil companies.

There is considerable misunderstanding about the oil and natural gas industry's earnings and how they compare with other industries. In fact, its earnings are typically in line with other industries, and often they are lower.

In the first quarter of 2009, oil and natural gas earnings averaged 5.7 cents per dollar of sales as compared with 6.0 cents per dollar for U.S. manufacturing - excluding the financially challenged auto industry.

From 2002 to 2006, average earnings for the oil industry stood at approximately 7.4 cents on each dollar of sales – a penny above the five-year average for all U.S. manufacturing industries and just two-tenths of a penny above all U.S. manufacturing, excluding the automobile sector.

And let’s not forget, industry earnings are critical to the future energy security of America.

Since 1992, the oil and natural gas industry has invested $1.25 trillion in hopes of finding new ways to produce, refine and deliver its product to consumers. The industry has also invested money into renewable and sustainable energy sources. Technological innovations, refinery capacities and distribution methods have all improved thanks to the foresight and reinvestments of American oil and natural gas companies. And the income for these reinvestments comes directly from earnings.

Components of Price - 5/29/2009 10:47:10 AM

Fri, 29 May 2009 10:47:10 -0500

A number of factors help to dictate oil prices on the global market. Whether a barrel of oil is produced in Texas, Venezuela or Saudi Arabia, its price is the outcome of decisions by traders at the New York Mercantile Exchange and other trading centers, who are reacting to assessments of market conditions as well as fundamental supply and demand.

The price of crude oil is the major factor in determining the price of gasoline at the pump, while other costs included are refining and distribution costs, marketing and taxes. In fact, every time U.S. motorists pull up to the pump, they pay nearly 46 cents in state and federal taxes per gallon of gasoline.

Occasionally, higher pump prices bring accusations of price gouging. However, America’s oil and natural gas industry is one of the most heavily regulated, and the U.S. Federal Trade Commission (FTC), other federal agencies and state attorneys-general have investigated the causes of price spikes for decades and have consistently found that it is the markets that are responsible for price fluctuations.

To quote the FTC: "In no other industry does the FTC maintain a price monitoring project such as its project to monitor retail gasoline and diesel prices."

Some additional factors that can influence fuel prices include:

Emptying refinery tanks to switch from winter-grade to summer-grade fuels as called for by clean-air regulations
Balancing availability and the limitations on substituting inventory of specialized fuels required by various regions of the country
Major weather events such as hurricanes and extreme cold snaps
Local market conditions that can affect pricing decisions at retail fuel outlets
Strikes, acts of sabotage or other operating disruptions that occur in unstable oil-producing regions around the world

Government policies have made it difficult for the industry to produce and deliver the oil and natural gas consumers need. The federal government has restricted offshore exploration and production and it has been slow to remove bottlenecks in government permitting onshore.

There is no question – domestic oil and natural gas development could provide us with more energy now. Decisions we make today impact the energy situation and prices we pay 10 years from now. While other countries are doing all they can to develop their own resources, Congress continues to block access to U.S. oil and natural gas resources and continue to call for our retreat from global markets.

America has the 12^th largest oil reserves in the world, but we are unable to develop much of these resources due to restrictive government policies.

Increasing access to oil and natural gas sources would not only lead to more supply, but more American jobs. Resource exploration would put millions of dollars into federal and state budgets – and those additional funds could be used for any number of domestic projects such as infrastructure repairs, new schools and textbooks, or health care expenditures.

Hurricane Response and Market Effect - 5/28/2009 4:43:44 PM

Thu, 28 May 2009 16:43:44 -0500

The recent hurricanes that ripped through the Gulf of Mexico put a strain on U.S. oil and natural gas operations. Hurricanes Gustav and Ike led to the near-complete shutdown of the oil and natural gas infrastructure and production in the Gulf area, a major supplier of domestic energy.

As a result of the temporary loss of gasoline production and pockets of surging demand, fuel prices rose in some areas across the country. Many have asked: "Why should the price of gasoline increase in my area when we are nowhere near the hurricane-affected areas?" API has assembled this fact sheet to help consumers better understand the interconnected U.S. fuel supply system and what happens when a supply shock, such as a hurricane, occurs.

Refining Capacity
The Gulf Coast region of Louisiana, Mississippi and Texas is the heart of the nation’s oil and natural gas industry. It accounts for 46 percent of U.S. refining capacity and the Gulf of Mexico accounts for about 25 percent of the oil and 15 percent of the natural gas produced in the United States.

In advance of a tropical storm or hurricane, companies will evaluate and may decide to evacuate all non-essential personnel and begin the process of shutting down production, refining operations and pipelines. After a storm passes, companies must perform extensive inspections and damage evaluations to determine when it is safe to resume operations. Even if there is no damage, production cannot always resume immediately. For example, restarting a refinery is complicated and it may take several days to restore full production. The restoration of power supplies is crucial, and electricity disruptions are common after a hurricane. Refineries also can be hampered by a lack of crude oil feedstock if offshore production platforms or ports and pipelines have sustained damaged or loss of power supply.

Interconnected Petroleum Supply System
Refineries and pipelines originating in the Gulf Coast region are major suppliers to other parts of the nation which is why motorists in states far from Texas and Louisiana can feel the price effects of a hurricane.

According to the Energy Information Administration (EIA), half the gasoline used on the East Coast and half of the crude oil run in refineries in the Midwest are shipped from the Gulf Coast region of the United States. In 2007, 1.9 billion barrels of crude oil, 1.3 billion barrels of petroleum products and 547 million barrels of finished motor gasoline were transported from the Gulf area throughout the country using all modes of delivery, including pipeline, tanker and barge.

Market Response
When a hurricane disrupts refinery operations, the combination of an immediate loss of gasoline and diesel production and a lack of demand for crude oil can result in a two-tier market – the price of fuel can rise and the price of crude can fall. At the same time, there also can be pockets of rising demand for fuel.

As we saw in the aftermath of hurricanes Katrina and Rita, market forces and the cooperation of government and the oil and natural gas industry were the most effective path to a restoration of supplies. Obviously, when there is a disruption in supply and operations there are challenges in ensuring fuel is available to all customers. The industry seeks to resume normal operations as quickly and safely as possible to continue to meet consumer demand. The government also steps in to alleviate supply concerns by issuing multi-state fuel waivers which encourage imports, and by offering crude oil from the nation’s Strategic Petroleum Reserve.

Environmental Expenditures
During the powerful 2005 hurricanes Rita and Katrina, the oil and natural gas industry did not experience any significant spills from offshore facilities.

The nation's oil and natural gas industry invests heavily in advanced technology to produce the energy our nation needs while protecting the environment. The industry is committed to safety and environmental protection. From 1996 to 2006, the industry invested $95 billion in environmental protection, or nearly $319 for every person living in the United States. It is vital to understand the environmental conditions in and around the Gulf of Mexico and to apply that knowledge to make offshore and onshore facilities less vulnerable when hurricanes hit.

Safety
The oil and natural gas industry has developed standards to ensure the safety of personnel on drilling rigs and platforms leading up to and following a hurricane.

Days in advance of a tropical storm or hurricane moving toward or near their drilling and production operations, companies will evaluate the situation and may decide to evacuate personnel and may relocate drillships to a safe location. After a storm has passed, operators initiate "flyovers" of onshore and offshore facilities to evaluate damage from the air. Once safety concerns are addressed, operators will send assessment crews to offshore facilities to physically assess the damage. If facilities and supporting infrastructure are undamaged and ready to accept shipments, operators will begin restarting production and drilling rigs will commence operations.

Consumer Tips
When a hurricane threatens to disrupt fuel production, it is important for consumers to conserve energy and not change their buying habits.

According to FEMA, consumers in the path of a hurricane or tropical storm should they have a proper safety and evacuation plan and secure their homes. As a storm approaches, consumers around the country should conserve energy use in homes and vehicles and maintain regular buying habits which can help alleviate a sudden surge in demand.

Policy Choices Needed to Ensure Future Energy Security

-	Reduce barriers to increasing domestic supplies.	-	Refrain from new taxes that make it more expensive to develop our domestic supplies.
-	Encourage investment in long-term energy initiatives and advanced technologies.	-	Support the need to participate actively in global energy markets rather than isolate the U.S.
-	Encourage energy efficiency.	-	Rely on market forces to allocate products.

Earnings in Perspective - 5/28/2009 11:11:45 AM

Thu, 28 May 2009 11:11:45 -0500

Oil and natural gas companies are not immune to the global recession and the first quarter financial results underscore that. In recent years, much media and political attention has focused on rising oil and natural gas industry earnings, bolstered by record-high oil prices. But the oil and natural gas industry, like other commodity businesses, is highly cyclical.

Typically, oil and natural gas earnings are in line with the average of other major U.S. manufacturing industries. This fact is not well-understood, however, in part because reports usually focus on only half the story—the profits earned.

Though constantly targeted by politicians, oil and natural gas company earnings aren’t much higher than the Dow Jones Industrial Average, and are right in line with other manufacturing industries at around 7.6 percent.

Like other industries, the oil and natural gas industry strives to maintain a healthy earnings capability. It does so to remain competitive and to benefit its millions of shareholders, across the country and in all walks of life. Healthy earnings also allow the industry to invest in innovative technologies that improve our environment and increase production to keep America going strong—even as it leads the search for newer technologies, and new sources of energy that will provide a more secure tomorrow.

API has assembled a primer that addresses these issues. View the full primer to learn more about industry earnings.

Your Money, Your Energy - 5/28/2009 11:11:03 AM

Thu, 28 May 2009 11:11:03 -0500

The price of crude oil is the major factor in determining the price of gasoline at the pump, but there are a number of other factors. While it may not seem so to frustrated Americans struggling to make ends meet, today’s gasoline prices are very much in line with crude prices.

Historically, what consumers pay at the gasoline pump has been around 97 cents a gallon higher than the price of crude oil per gallon, and that’s where gasoline prices are these days. Included in the pump price of gasoline are taxes, refining, marketing, transportation and other costs.

Other factors -- such as demand, gasoline inventory and import levels, and the effect of weather and other factors on refinery operations -- may play a part in how long it will take retail gasoline prices to match crude oil prices.

According to the federal Energy Information Administration, the cost to produce and deliver gasoline to consumers “includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs and, finally, the retail station costs and taxes. The prices paid by consumers at the pump reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors, and retail station owners.”

Take Action on Taxes - 5/22/2009 12:14:00 PM

Fri, 22 May 2009 12:14:00 -0500

The new administration recently sent Congress a budget proposal that included $400 billion in new taxes and fees on the U.S. energy sector—a plan that will put an economic burden on hard-working Americans and their families. As Congress considers this proposal, it is critical to look beyond political rhetoric and focus instead on the reality behind these new taxes.

Higher industry taxes would send ripples throughout the economy, discouraging business expansion, investment and job creation. They will also lead to higher costs for consumers—taking money away from American households and families.

Historically, higher taxes have resulted in less domestic energy because taxes make it more expensive to expand or initiate new exploration and development programs. In today’s economy, that could stifle recovery and make Americans more dependent on other countries for our energy supplies.

A majority of Americans support domestic access, and the oil and natural gas industry should be encouraged to develop our nation’s vast energy resources. This would improve America’s energy security, create jobs and provide federal, state and local governments with more than $1.7 trillion in new revenues.

Let your voice be heard. Tell the administration and Congress that American families and businesses can not afford higher taxes.

Contact the administration and Congress

Use the widget below to speak up—via Facebook, Twitter, YouTube, official Web site, or e-mail—and tell the administration and Congress to oppose these increased taxes and fees on the energy industry. For a sidebar-ready version of the widget, click here and look to the bottom right of the page.

Tell Others Where You Stand

On Twitter...

Tweet your support! (E.g. - Congress: Don't raise energy taxes. Higher taxes = fewer jobs & diminished #energy security. http://sn.im/fg4m1)
Use #energy and #taxes to join the conversation on Twitter.
Follow @EnergyTomorrow on Twitter to stay informed on the latest taxes updates.

On Your Blog...

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Why do I need to contact Congress?

It is critical that both the administration and members of Congress hear from you in opposition to higher taxes on U.S. energy companies.

Imposing additional taxes on America's oil and natural gas companies will not lower energy costs and will make us more reliant on others for our energy supplies.

Use the interactive tool above (or go directly to the Partnership for America’s Energy Security site) to send an e-mail to your U.S. Representative and/or Senators telling them to oppose new taxes that American families and businesses can not afford.

To learn more:

Watch this video to see what Americans nationwide think about increased taxes on energy companies.
Click on this interactive map to see how your state would be affected by energy taxes.
Read this page to see the political rhetoric vs. the reality when it comes to energy taxes.
How could access to oil and natural gas benefit you and our economy? Take a closer look at this study about untapped U.S. oil and natural gas resources.

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Energy and the Economy - 5/19/2009 12:29:41 PM

Tue, 19 May 2009 12:29:41 -0500

As a critical link in the nation’s energy supply, the oil and natural gas industry makes many important contributions to the U.S. economy by providing an economical energy source for transportation and the production of other goods. According to U.S. Department of Energy, the oil sector currently supplies more than 40% of the nation’s total energy demands and more than 99% of the fuel used by Americans in their cars and trucks. Additionally, 900 of the next 1,000 U.S. power plants will use natural gas.

In addition to the important products made available by the oil and natural gas industry, the industry also makes significant economic contributions as an employer and purchaser of goods and services. The oil and natural gas industry is one of the largest employers in the country, employing millions of Americans in exploring, producing, processing, transporting, and marketing oil and natural gas. Millions of other jobs are supported by the industry’s purchases of goods and services from other producers.

Facts and Figures About the U.S. Oil and Natural Gas Industry

1.838 million	People that are directly employed in the U.S. by the oil and gas industry
4.066 million	Indirect jobs that are created by the oil and natural gas industry
5.904 million	Total jobs created by the oil and gas industry
$90 billion	Total amount in taxes paid by the oil and natural gas industry in 2006
$28 billion	Amount paid by the oil and natural gas industry in U.S. federal, state and local taxes in 2006
$53 billion	Amount paid by the industry in foreign income taxes
$9 billion	Amount paid by the industry in both U.S. and foreign deferred taxes
$174 billion	Total amount that a representative sample of 57 oil and natural gas companies have invested back into the industry
97%	Percentage of those companies’ net income represented by the invested $174 billion
$121.3 billion	Estimated investment in emerging energy technologies in the North American market by U.S. oil and natural gas companies from 2000 to 2007
65%	Estimated percentage of all U.S. corporate and government investments in emerging energy technologies from 2000 to 2007 contributed by oil and natural gas companies from 2000 to 2007
$1.5 billion	Amount invested by oil and natural gas companies in non-hydrocarbon technologies such as solar, wind and geothermal from 2000 to 2007
$15.9 billion	Amount invested by oil and natural gas companies for advanced end-use technologies such as cogeneration, fuel-cell vehicles and advanced battery technologies from 2000 to 2007
$103.9 billion	Amount invested by oil and natural gas companies for frontier hydrocarbons such as oil sands, oil shale and gasification technology from 2000 to 2007
27%	Percentage of total shares of public oil and natural gas companies owned by pension funds
29.5%	Percentage of total shares of public oil and natural gas companies owned by mutual funds and other asset management companies
1.5%	Percentage of total shares of public oil and natural gas companies owned by corporate management

Diesel Prices - 5/15/2009 11:50:36 AM

Fri, 15 May 2009 11:50:36 -0500

Recent U.S. retail diesel prices have continued to be much lower than at their peak last July of $4.76 per gallon – they were down by roughly $2.55 per gallon as of mid-May of this year. Further, the difference between retail diesel and gasoline prices, which had averaged 80 cents or more per gallon late in 2008, shrank to 10 to 15 cents per gallon more recently, and the national average for diesel actually fell below gasolines in mid-May. While, in years past, diesel prices had tended to be lower than for gasoline, this May was the first time since July 2007 that diesel was cheaper per gallon than gasoline, based on data from the Energy Information Administration.

Longer-term factors that have been tied to variations in gasoline versus diesel prices include the different seasonal price variations for the two fuels, and differing tax rates.

Factors in more recent years have included at-times strong growth in U.S and world diesel demand, the relative unavailability of diesel imports, and the introduction of ultra-low sulfur diesel in 2006, which is contributing to improved air quality but costs more to manufacture. These factors are detailed below.

Seasonal price variations

Historically, gasoline prices (other things being equal) have tended to be higher in the summer when demand is strongest. Summer formulations also tend to require more expensive ingredients for improved air quality and for reliable engine performance during warm weather. Meanwhile, diesel prices have tended to be highest in the fall and winter, during higher demand periods for diesel and heating oil linked to such activities as crop harvests and heating seasons. (Heating oil and diesel fuel are very closely related fuels, and thus developments in the market for heating oil can affect diesel, and vice versa).

The seasonal variation in diesel and gasoline prices has been far from a simple, predictable pattern, since so many other things (including crude oil prices) can also affect retail prices. Nevertheless, the result of all these factors has been that historically, diesel prices have sometimes been higher than gasoline prices, and sometimes lower. In fact, almost every year for at least the past 10 years, average national diesel prices have been higher than gasoline prices in at least some months. Still, the price differences in recent years have been larger than experienced in earlier years, so seasonal variation alone does not explain recent diesel prices.

Tax rates

Federal excise taxes, included in the pump price, are higher for diesel than for gasoline. For diesel, the per-gallon federal tax is 24.4 cents, compared with 18.4 cents for gasoline. State and local taxes may differ among fuels as well, resulting in a national average per gallon tax of 50.8 cents for diesel compared with 45.6 cents for gasoline.

U.S. demand trends

For sustained periods in recent years, U.S. demand for highway diesel has risen much more strongly than for gasoline. From 2002 through 2007, for example, it grew at roughly triple the rate of gasoline – 3 percent per year over the five-year period, compared with 1 percent annually for gasoline. As a result, diesel’s share rose to more than one-fifth of all U.S. highway fuel used. Even though demand weakened for both fuels in 2008, highway diesel’s larger share is estimated to have continued. Thus, stronger demand growth for diesel relative to gasoline over the longer term helped tighten the balance between domestic demand and supply for diesel.

Also, highway diesel demand has historically tended to be less responsive to prices than has gasoline demand, because it is often just one link in a larger ongoing process of manufacturing and distribution. That means that, compared with gasoline markets, if there is a tight supply situation, market forces may bid up diesel prices to a higher level before consumption begins to slow.

On the other hand, demand for diesel has historically been more sensitive than for gasoline to economic conditions, and data for 2009 through April suggest that the current economic downturn may, in fact, be having a greater effect so far on highway diesel demand than on gasoline. This may have taken some of the pressure off the U.S. diesel market.

Relative scarcity of diesel imports due to strong diesel growth trends elsewhere

Demand for diesel has grown strongly throughout the world in recent years, so finding additional diesel fuel to import has become more difficult. Strong economic growth in developing countries, droughts in some areas that spurred a need for greater back-up generation, and a short-term surge in preparation for the Olympics in Beijing have all at times added to world demand for diesel. Europe has also been moving steadily towards greater use of diesel. Diesel vehicles made up only 22 percent of new car sales in Europe in 1995, but their share has shifted to more than 50 percent more recently. Understandably, over the past ten years, European diesel demand has risen more than 15 percent, while gasoline demand has actually fallen 21 percent.

Increased European diesel demand has also meant that European refineries have had more gasoline available for export. This has helped increase gasoline supply availability in this country, which imports about 12 percent of its gasoline. Increased gasoline imports were especially helpful in smoothing out the hurricane-related disruptions to U.S. Gulf Coast refining capacity in both 2005 and 2008.

Reflecting the relative unavailability of diesel for import, and in response to the surging demand for diesel, domestic refineries managed to increase production of diesel and heating oil (which are grouped together in available data) by nearly 20 percent from 2002 to 2008. In 2008 alone, the industry produced nearly 11 percent more ultra-low sulfur diesel, the main type required for on-highway use, than for the year before. During the first four months of 2009, despite the double-digit, recession-induced drop-off in demand, production came within less than 2 percent of the all-time record for the period.

Ultra-low sulfur diesel

Ultra-low sulfur diesel, also known as ULSD or “clean diesel,” was introduced for on-highway use in 2006. This fuel, which meets the exacting government specification of only 15 parts per million of sulfur, accounts for more than 70 percent of all U.S. production of distillate fuel oil (diesel and heating oil). More than $8 billion in capital investments for the new equipment required to produce and distribute this clean diesel has added to production and distribution costs. Further, in 2007, off-highway diesel for locomotive, marine and non-road equipment came under more stringent specifications, as well.

Other considerations – international comparisons

Excluding taxes, diesel fuel is more costly than gasoline in many other major industrial countries. In much of Europe, for example, retail prices, excluding tax, in April 2009 were roughly 10 cents to 40 cents per gallon greater than for gasoline, according to the International Energy Agency. At the pump, consumers paid less for diesel in some countries only because these countries tax gasoline much more heavily than diesel. For example, in France, consumers paid nearly $1 more per gallon in taxes for gasoline versus diesel, resulting in retail prices of $5.84 per gallon for gasoline and $4.85 per gallon for diesel.

Market Price of Crude Oil - 4/20/2009 12:14:36 PM

Mon, 20 Apr 2009 12:14:36 -0500

To put it in perspective, people gladly pay $3 a day for 20 ounces of coffee or bottled water. Consider the recent price per gallon of other items: coffee is about $32 per gallon; shampoo is nearly $40, orange juice is more than $7 and milk is about $4.

People constantly worry about oil costing $100 a barrel or more, but here’s what other things would cost per barrel: soda per barrel would be $126, mouthwash per barrel would be $682, and olive oil per barrel would be $2,370!

The price of global commodities is based on supply and demand, and crude oil is no different. The availability of the daily world oil supply is based on two simple factors—how much crude oil can be produced and how quickly and efficiently that raw energy can be turned into gasoline and other products for consumers.

Since developing nations such as China and India are using more oil, global demand – and global price – has increased. Even with gains in efficiency, technology and alternatives, the world’s supply/demand balance will remain tight as nations seek the energy they need to sustain domestic growth. This tight global demand illustrates why oil and natural gas companies need increased access to develop domestic sources of oil and natural gas. Domestic barriers to oil and natural gas production only contribute to volatile energy prices, slower economic growth, and lost American jobs.

Facts About Windfall Profits Tax - 4/14/2009 3:08:48 PM

Tue, 14 Apr 2009 15:08:48 -0500

The Windfall Profits Tax (WPT) was a bad idea in the 1980s, and it is an even worse idea today in light of the tremendous capital investment that will be needed in the nation’s oil and natural gas sector to meet the long-term demand for energy in the United States and around the world.

Read the latest study on the economic and energy sector impacts of a windfall profits tax.

Why is it a bad idea?

The oil and natural gas industry is not earning "windfall profits." The industry’s earnings have been very much in line with other industries, and often are lower.

The oil industry uses its earnings to invest in new technology, new production, refining and product distribution infrastructure, and environmental and product quality improvements. According to the Congressional Research Service (CRS), before the WPT was repealed in 1988, it generated about $38 billion in net revenues ($80 billion in gross revenues)— money that could have been used by the oil industry to invest in new energy production and infrastructure.
A WPT would establish a precedent that could discourage investment in domestic energy production. Studies have shown that producers will have to invest almost $1.2 trillion through 2025 to fund U.S. and Canadian natural gas exploration and production activities. Investments of this magnitude require long-term fiscal stability.
The industry must manage its business in the face of severe price fluctuations, riding out the low prices in anticipation of recovering during higher prices. Crude oil prices, which are set on the world market, and natural gas prices fluctuate substantially and unpredictably. In fact, as recently as 1999, the domestic petroleum industry was weathering depressed oil prices of around $10 per barrel. In 2008, the price of oil dropped more than $100 in just a few months.
A WPT taxes away the benefits of better times and offers no help to oil and gas companies during bad times. This discourages investment in domestic production and increases U.S. dependence on imported oil. The CRS concluded that between 1980 and 1986 the WPT reduced domestic oil production by as much as 1.26 billion barrels.

What is the Windfall Profit Tax?

The WPT was enacted in 1980 to raise revenue and to ensure that oil companies did not benefit unduly as domestic price controls were removed in a period of relatively high crude oil prices (the "Second Oil Crisis" occasioned by the Iran/Iraq war). While it failed to raise the revenues predicted due to declining oil prices in the 1980s, the WPT did drain $38 billion in industry net revenues that could have been used to invest in new oil and gas production. In fact, as much as 1.26 billion fewer barrels of oil were produced domestically due to the WPT.

Executive Summary - 3/17/2009 11:40:46 AM

Tue, 17 Mar 2009 11:40:46 -0500

A Fresh Perspective on Energy
How Our Lifestyles Drive Demand… And What We Can Do About It

Wendell Cox
Principal, Demographia

As the global race for energy becomes more competitive, we need to broaden our understanding of the factors behind rising energy demand.

Americans rely on plentiful supplies of energy to fuel our prosperity and our high standard of living. In the face of high demand, the good news is that America has made tremendous strides in energy efficiency and conservation. Today, new technology allows us to use less energy, while providing the same level of energy power in our homes and at work. Still, efficiency and conservation alone will not solve the energy challenges we face. With every house, car and refrigerator that has become more energy efficient, Americans are purchasing larger energy-consuming homes and appliances and more hi-tech gadgets to maintain their quality of life.

Let's Talk Numbers
Domestic	CHINA and INDIA
Bigger Houses:¹ 1,500 sq. ft. [1974] 2,500 sq. ft. [2005]	Urban Areas in China:² Will add 350 million people by 2030
Heavier Cars:³ 3,220 lbs. [1987] 4,066 lbs. [2004]	Coal Plants:⁴ Each week in either China or India one new Coal-Fired Plant comes online
Population: U.S. +65M - the size of France [2030]	Population: India 1.5B - surpassing China [2030]

Over the long run, population and economic growth will continue to contribute to rising energy demand, both in the United States and abroad, especially in China and India. Energy is vital to America's economy — and it is a key component of any stable, thriving economy. Our country's desired economic prosperity will be the key driver of future energy demand. Moreover, the strengthening economies of China, India and other developing nations are underpinning consumer trends similar to those in the United States, as those countries strive to achieve our living standards.

Population Growth

By the year 2030, the United States will have 73 million more people – the equivalent of adding the entire population of France and Austria.^{5, 6} That is 73 million more Americans who will drive cars, own homes, have jobs and rely on energy in every aspect of their daily lives.
Nations like India and China will see enormous population growth over the next few decades. By 2030, India's population is expected to reach 1.5 billion people, surpassing China.⁷
Other less developed nations, such as Indonesia, Nigeria, Vietnam and the Philippines will also see strong population growth through the year 2030.⁸ In nations like these, where billions aspire to higher standards of living, energy demand will remain high.

Economic Growth

As the population rises in the United States, the labor force will expand, output will rise and productivity will grow. The United States' GDP is forecasted to grow 2.5 percent per year, putting an even greater strain on energy supplies.⁹
On the other side of the globe, China's fast-growing economy has the nation on pace to become the world's largest energy consumer after 2010, overtaking the United States in energy demand.¹⁰ Vietnam is another, lesser-known example of a growing economy. The country is just behind where China was 15 years ago with an average annual GDP growth of nearly 7 percent over the last ten years – more than double the United States' rate.^{11, 12}

Cultural and Social Trends

As the United States' economy continues its expansion, purchases will increase, electronics use will rise and information technology use will grow exponentially. In the United States, the average household owns 25 consumer electronics.¹³ Furthermore, to fuel its presence online and to keep its site up and running, Google relies on data centers the size of two football fields.¹⁴
Consumer electronics in the United States used about 147 billion kilowatt-hours of electricity in 2006 – which was more electricity than produced by all of the windmills, solar panels and biomass-to-electricity plants in America that year.¹⁵ To put it in even greater context, in 2006, consumer electronics required nearly as much energy as the entire state of Pennsylvania, the country's sixth largest state.^{16, 17}
On the global front, China's economic growth allows residents to continue purchasing the luxuries they've lacked for many decades. For instance, the number of cars in China doubled between 2000 and 2006.¹⁸ Less than 25 years from now, China will have more cars than the United States, but more miles of highway^{19, 20, 21}

These trends present us with staggering numbers: the Department of Energy (DOE) predicts that energy demand in the United States will rise 11 percent by 2030, and DOE and the International Energy Agency predicts that global demand will rise 45 percent in the same period.^{22, 23} We also know from these organizations that fossil fuels will continue to meet 80 percent of our energy needs, both in the United States and abroad.²⁴

We often look at rising energy demand as a crisis, but it really means opportunity. Energy has made modern lifestyles possible, and it is the key to eradicating poverty around the world and maintaining upward economic growth.

We can moderate demand through efficiency and conservation, but as top energy policy organizations agree, that is not enough. Alternative sources of energy will play a role but alone cannot satisfy the demand.

Today, the challenge before America is the development of our energy here at home. In reality, energy supplies are plentiful, but access is limited.^{25, 26}

Long-term population and economic growth, in concert with demographic and behavioral trends, lead to one conclusion – the world needs more energy, not less, to meet growing demand and sustain a healthy, vibrant future. As a nation, we need to support the production of all sources of energy, especially oil and natural gas, as well as the development of technology that improves efficiency and preserves the environment. America needs a realistic, long-term solution now.

¹United States Census Bureau, Annual Characteristics of Houses, (2007).
²International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 243.
³Steven Plotkin, "Is Bigger Better?" Environment, November 2004, Vol. 46 No. 99, with information from K. H. Hellman and R. M. Heavenrich, Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004, EPA 420-S-04-002, (April 2004).
⁴"No New Coal," Environmental Science & Technology Online, (December 2007).
⁵Energy Information Administration, Annual Energy Outlook 2009: Early Release, (2009), 9, Table 20.
⁶United Nations Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2006 Revision, (2007).
⁷International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 59, 464.
⁸United Nations World Population Database, (2006).
⁹Energy Information Administration, Annual Energy Outlook 2009: Early Release, (2009), 2.
¹⁰International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 283.
¹¹Estimated, using data from World Development Report, (1997), and Central Intelligence Agency, World Fact Book, (2008).
¹²International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 62.
¹³Consumer Electronics Association Release, CEA Finds American Adults Spend $1,200 Annually on Consumer Electronics Products, April 26, 2007.
¹⁴John Markoff and Saul Hansell, "Hiding in Plain Sight, Google Seeks More Power," New York Times, June 14, 2006.
¹⁵Calculated, using Kurt W. Roth and Kurtis McKenny, "Energy Consumption by Consumer Electronics in U.S. Residences," TIAX LLC, (January 2007), 16, and Energy Information Administration, Annual Energy Outlook, (2008), 131.
¹⁶Energy Information Administration, State Electricity Sales, (2006).
¹⁷United States Census Bureau, U.S. Population Estimates, (2006).
¹⁸International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 300.
¹⁹International Energy Agency, World Energy Outlook 2007: China and India Insights, (2007), 298.
²⁰United States Federal Highway Administration, Status of the Nation's Highways, Bridges, and Transit: 2004 Conditions and Performance, (2004).
²¹Demographia, China "7918" Motorway System (Freeway System): Summary, November, 28, 2006.
²²Energy Information Administration, Annual Energy Outlook 2009: Early Release, (2009), 9.
²³International Energy Agency, World Energy Outlook 2008, (2008), 38.
²⁴International Energy Agency, World Energy Outlook 2008: China and India Insights, (2008), 38.
²⁵Energy Information Administration, International Energy Outlook, (2007), 36.
²⁶Energy Information Administration, United States Natural Gas Markets, (2001), Report #:SR-OIAF/2001-06.

Access Counter - 2/17/2009 11:22:44 AM

Tue, 17 Feb 2009 11:22:44 -0600

The development of America’s vast domestic oil and natural gas resources that had been kept off-limits by Congress for decades could generate more government revenue, create new jobs and significantly boost domestic production.

Want to learn more about increased production, decreased imports, and the cars and homes that could be powered by untapped U.S. resources? The API Access Counter enables you to explore resources and regions to understand the benefits of increased energy exploration.

Windfall Profits Tax Could Hurt Economy, Jobs - 2/3/2009 11:02:50 AM

Tue, 03 Feb 2009 11:02:50 -0600

The imposition of new taxes on the oil and natural gas industry likely could kill hundreds of thousands of jobs, slow economic growth and make Americans more dependent on foreign sources of energy, according to a study released today.

The CRA International study, commissioned by the American Petroleum Institute, underscores how ill-advised tax policy would likely result in less domestic oil and natural gas production – which would likely undermine both the nation’s economic and energy security. While there is no specific windfall profits tax proposal being considered by the Congress, the CRA analysis focuses on the windfall profits tax to illustrate that a similar tax or combination of taxes could have negative consequences for the U.S. economy.

“U.S. dependence on foreign oil could be magnified over the next 20 years if the oil and gas companies face the prospect of higher taxes that reduce returns on new investments,” said W. David Montgomery, a vice president at CRA, who conducted the study. “Although this study has specifically assessed the impact of a proposed windfall profits tax, similar forms of increased taxation or other policies that reduce incentives for new investment would be expected to have similar negative consequences.”

The study also found that a windfall profits tax likely would:

Cause a net loss of up to 490,000 U.S. jobs by 2030.
Reduce U.S. gross domestic product by roughly 1 percent, or $240 billion by 2030.
Increase U.S. imports of crude oil by up to 18 percent in 2030 and reduce U.S. domestic production of crude oil by up to 26 percent in the same year.

“Any taxes or combination of taxes similar to a windfall profits tax would likely undermine the nation’s energy security by discouraging domestic production and would hurt the economic security of Americans by reducing household incomes and job opportunities,” said API President Jack Gerard. “Especially in these tough economic times, we need policies that spur economic growth, create jobs and encourage the development of oil and natural gas resources that belong to the American people.”

Read the press release on the WPT study.

Do You Own an Oil Company? - 1/29/2009 10:01:23 AM

Thu, 29 Jan 2009 10:01:23 -0600

If you’re wondering who owns “Big Oil,” chances are good the answer is “you do.”

If you have a mutual fund account, and 55 million U.S. households do, there’s a good chance it invests in oil and natural gas stocks. If you have an IRA or personal retirement account, and 45 million U.S households do, there’s a good chance it invests in energy stocks.

It’s a common misperception that oil executives are the only benefactors of industry success. Instead, the bulk of ‘Big Oil’ benefactors are hardworking men and women across America who boost their retirement portfolios through oil and natural gas stock. In fact, only 1.5 percent of company shares are owned by industry executives. The rest are owned by mutual fund investors, or those planning for retirement with pension and IRA funds.

As API Chief Economist John Felmy has noted: "When politicians seek to punish these companies and 'take their profits,' they are not targeting industry executives but the hard-earned savings of working people."

A study by economists Robert J. Shapiro and Nam D. Pham found:

Almost 43 percent of oil and natural gas company shares are owned by mutual funds and asset management companies that have mutual funds. Mutual funds manage accounts for 55 million U.S. households with a median income of $68,700.
Twenty seven percent of shares are owned by other institutional investors like pension funds. In 2004, more than 2,600 pension funds run by federal, state and local governments held almost $64 billion in shares of U.S. oil and natural gas companies. These funds represent the major retirement security for the nation’s current and retired soldiers, teachers, and police and fire personnel at every level of government.
Fourteen percent of shares are held in IRA and other personal retirement accounts. Forty five million U.S. households have IRA and other personal retirement accounts, with an average account value of just over $22,000.

For more information read the news release that accompanies the study, including quotes from Shapiro, undersecretary of commerce for economic affairs under President Bill Clinton, and Pham.

Demand in Perspective - 12/12/2008 3:30:24 PM

Fri, 12 Dec 2008 15:30:24 -0600

Wendell Cox is principal of Demographia, a St. Louis area based public policy firm specializing in demographics, urban policy and transportation.

Mr. Cox recently surveyed the most authoritative studies on energy demand and assessed various energy trends. He maintains that despite recent dips energy demand will continue to rise and we’ll need all the energy we can get to meet it in the years to come.

Download the presentation primer (.pdf)

Overview

As the global race for energy becomes more competitive, we need to broaden our understanding of the factors behind rising energy demand.

Americans rely on plentiful supplies of energy to fuel our prosperity and high standard of living. The good news is that America has made tremendous strides in energy efficiency and conservation. However, energy efficiency alone will not solve the energy challenges we face. Economic, cultural and social trends show that we need an increasing amount of energy – including oil and natural gas – in the decades ahead. Moreover, the strengthening economies of China, India and other developing nations are underpinning consumer trends similar to those in the United States, as those countries strive to achieve our living standards.

Population and economic growth, in concert with demographic and behavioral trends, lead to one conclusion – the world needs more energy, not less, to meet projected demand and sustain a healthy, vibrant future. As a nation, we need to support the production of all sources of energy, especially oil and natural gas, as well as the development of technology that improves efficiency and preserves the environment. America needs a realistic, long-term solution now.

Happy Holidays, Brought to You by Energy

During the holiday season, energy consumption typically rises in the United States.

Media Coverage

Growing Energy Use Will Spark Creativity
San Antonio Express-News
To keep Texas and America competitive, we need a realistic, not romantic, energy policy. One that promises every time we flip a light switch, turn on the stove and heat or cool our homes, we have a reliable means to do so at an affordable cost to everyone.
read more

Energy Need Rises
The Washington Times
As the global race for energy becomes more competitive, the good news is that America has made tremendous strides in energy efficiency.
read more

Energy Opportunity, Not Crisis
The State
The Energy Information Administration, part of the Department of Energy, recently reported that it expects the world’s energy consumption to grow by 50 percent between 2005 and 2030.
read more

Need for Drilling Pushed
American Press
Americans have a stark choice over the next 22 years: increase oil, gas and coal production or accept a lower standard of living, said Wendell Cox, a consultant to the American Petroleum Institute.
read more

Wendell Cox Discusses Trends in Energy Demand
Midlands Biz News
There is just too much growth nationally and internationally for us to think that we can conserve our way out of this issue. It's one critical side of the equation, and the government will continue to play a key role by legislating stricter standards on miles per gallon (MPG) for automobiles and better efficiency requirements for new appliances.
read more

Wendell Cox Events - 12/11/2008 2:26:57 PM

Thu, 11 Dec 2008 14:26:57 -0600

Since June 2008, Wendell Cox has been speaking all over the United States educating people on energy demand trends. Many factors—including population and economic growth as well as other lifestyle trends like consumer electronics purchases, energy use in the home and, of course, on the road—lead to increased energy consumption both in the United States and abroad, particularly in developing nations.

He has been delivering his message to places where it matters most—growing metropolitan areas. To date, Mr. Cox has spoken in nine states at 12 events comprising Rotary Clubs, chambers of commerce, economic organizations and energy conferences.

Below, please find more information about the places he has been and what makes them important in terms of energy demand.

St. Louis
Mr. Cox gave his first Energy Demand Road Show presentation to members of the Rotary Club of St. Louis on June 12. Greater St. Louis is the 16th largest metropolitan area in the United States with a population of more than 2.8 million.

Click here to listen to Mr. Cox’s interview on KFTK-FM’s Allman and Crane Show.

Greenville, S.C.
Mr. Cox gave his second presentation to members of the North Greenville Rotary Club on July 18. Greenville is the largest city in The Upstate, which is the northwest region of South Carolina and the fastest-growing region in the state.

Click here to read an article in the Greenville News.

Dallas
Mr. Cox gave his third presentation to members of the Rotary Club of Dallas on Aug. 13. He brought his message to Dallas because the area is booming—the Dallas-Fort Worth area was ranked first in population growth in the nation, increasing by 162,250 people from July 1, 2006, to July 1, 2007. The U.S. Census reported that two of Dallas’s suburbs ranked third and 10th, on the bureau's list of fastest-growing cities. As the area expands, the city of Dallas has instituted energy efficiency measures and sustainability goals for a variety of local businesses and utilities.

Lake Charles, La.
Mr. Cox gave his fourth presentation to members of the Southwest Louisiana Economic Development Alliance on Aug. 14. The Alliance is located in Lake Charles, La., the fifth-largest city in Louisiana and a major petrochemical refining center.

Click here to read an article in the American Press.

Austin, Texas
Mr. Cox gave his fifth presentation to members of the Rotary Club of Austin on Aug. 19. As the third-fastest-growing city in the nation, Austin is heavily affected by our nation’s rising demand for energy.

According to the U.S. Census Bureau, Austin’s population has increased by 27.9 percent from 2000 to 2007, and another 2.9 percent since 2007. Energy consumption in Austin reached a record level in June 2008 and continues to rise.

Atlanta
The first in a series of joint events featuring former Congressman Charles Stenholm (D-Texas) and Mr. Cox, the U.S. Chamber of Commerce hosted the pair for its public affairs meeting in Atlanta on Sept. 12. Public and government affairs representatives from Chamber member organizations in Alabama, Florida, Georgia, South Carolina, Tennessee and Virginia attended the event.

Columbia, S.C.
Mr. Cox gave his seventh presentation to members of the Columbia World Affairs Council on Sept. 15. He appeared as part of the “Distinguished Speaker” series, which presents international experts and policymakers speaking on current issues.

Columbia is the state capital and largest city in South Carolina.

Click here to read Mr. Cox’s op-ed in The State. Click here to read an article in the Midlands Biz News LLC. The Midlands is an area made up of eight counties surrounding Columbia.

Phoenix
Mr. Cox gave his eighth presentation to members of the Arizona Chapter of the National Association of Business Economics on Sept. 23.

Did you know that Phoenix is ranked among the fastest-growing cities in the United States? The metropolitan area grew from 3.3 million in 2000 to 4.2 million in 2007. State projections forecast a population of 7.1 million by 2030—nearly as large as the San Francisco Bay Area is today. A century ago, Phoenix was not even among the 100 most populous cities in America.

Click here to read an article published in the Phoenix Business Journal on Sept. 23. Click here to listen to Mr. Cox’s interview on KFNN-AM’s Business for Breakfast.

Murrieta, Calif. (Lake Elsinore)
Mr. Cox gave his ninth presentation to members of the Economic Development Council of Southwest California on Sept. 25. The Southwest California region comprises Canyon Lake, Lake Elsinore and Riverside, among others, and is an hour drive from Los Angeles, Orange County and San Diego. It is also one of the fastest-growing areas in the nation.

Click here to read Mr. Cox’s op-ed in The Business Press.

Hartford, Conn.
Mr. Cox gave his 10th presentation to attendees of the "What’s the Deal?" Business and Energy Conference presented by the Connecticut Business and Industry Association and the Connecticut Power and Energy Society on Oct. 10. He served as the luncheon’s keynote speaker, presenting to more than 250 attendees.

Connecticut had the highest per capita income in the United States in 2007—that is 10 percent above second place New Jersey and more than one-third higher the national per capita average. This keeps Connecticut’s purchasing power and energy demand at a steady rate.

Aurora, Colo.
Mr. Cox gave his 11th presentation to members of the Rotary Club of Aurora on Oct. 15.

Did you know that the city of Aurora is Colorado’s fastest-growing city? People are moving to the Denver-Aurora-Boulder metropolitan area from all over the United States, especially from more costly housing markets like California. So it is no surprise that the region is one of the fastest-growing in America, ranking seventh among metropolitan areas with a population greater than 1 million people. According to the 2000 census, the Denver-Aurora urban area was denser than Chicago and 20 percent denser than Portland, Ore.

Click here to listen to Mr. Cox’s interview on KOA-AM.

San Antonio
Mr. Cox gave his 12th presentation to the San Antonio Business and Economics Society on Oct. 22.

The San Antonio metropolitan area is one of the fastest-growing in the nation. From 2000 to 2007, San Antonio’s net domestic migration was 7.7 percent—by comparison, San Diego (often compared to San Antonio in domestic migration) dropped by 4 percent.

Click here to read Mr. Cox’s op-ed in the San Antonio Express-News.

Heating Oil Prices - 11/17/2008 8:54:00 AM

Mon, 17 Nov 2008 08:54:00 -0600

Forecasts from the U.S. government and private groups are predicting continued strong heating oil prices, but lower this year than last. Many Americans want to understand why they are paying what they are paying. API has assembled this fact sheet to help consumers better understand the components that go into heating oil prices and what steps they can take to lower their own consumption.

Download the API winter fuels fact sheet (.pdf)

Winter Fuel Outlook
Average consumer heating expenditures forecasted to be up this winter
Consumer expenditures for home heating this winter are expected to be slightly higher than last winter. According to the U.S. Energy Information Administration, the average winter heating bill for all fuels is expected to increase 1.4 percent, or by nearly $14, to $1,004. For those households heating with heating oil, prices could be down 13.3 percent, or about $259, to an average expenditure of $1,694. Only 7 percent of U.S. households depend on heating oil for winter fuel and most of these households are in the Northeast, where 31 percent of households use heating oil as their primary space heating fuel. EIA’s forecasts for homes heated with other fuels include an average price drop of 8.1 percent for propane, an increase of 3.6 percent for natural gas, and 9.5 percent for electricity.

Crude Oil
Crude oil prices are the biggest factor affecting heating oil prices
This summer, early buyers of heating oil faced much higher prices than last year in large part because of record-high crude oil prices. Recently, though, crude oil prices have fallen sharply as forecasts for worldwide demand have been trimmed as a result of the economic slowdown. Crude oil is the single largest component of heating oil, so when crude oil costs are higher, heating oil prices are likely to be higher. Conversely, when crude oil prices are lower, heating oil prices are usually lower.

Increased Demand for Diesel
Increased diesel demand has affected heating oil supplies
Heating oil and diesel fuel are closely related products. Both are distillates and are generally made together during the refining process. Only the last steps are different. When demand for on-highway diesel increases, refiners often generate a greater proportion of diesel than heating oil from the distillate stream, and vice versa when heating oil demand increases. Over the past year, until just recently, global highway diesel demand has been much stronger than a year ago, causing much of the distillate yield to go toward diesel. Worldwide diesel demand has been propelled mainly by economic growth, particularly in developing nations, as well as a push in Europe to increase the usage of diesel vehicles. More than half of European cars are fueled by diesel.

Inventories Complicated by Hurricanes
Northeast inventory levels lower than average, output up
In the Northeast, where the vast majority of the nation’s heating oil is consumed, distillate inventories as of October 31, were 17.8 percent below the five-year average, in part because of strong diesel demand and also because of widespread refinery outages in the Gulf Coast region following hurricanes Gustav and Ike. However, over the past five years, the main sources of heating oil supplies from December through February have been imports and refinery production, with inventories only meeting about 3 percent of demand. Through October 31 of this year, U.S. refineries have been producing an all-time record amount of distillate – mostly diesel – to meet demand in America and abroad. For the four weeks ending October 31, U.S. distillate production was the highest ever for the same period. The production of heating oil traditionally ramps up in autumn in expectation of increased, winter-related demand.

Help and Resources
Finding the money to pay heating bills can be difficult for some consumers, particularly lower income Americans. Energy assistance, including help with utility bills or programs to reduce energy usage by improving the energy efficiency of a home, is available for lower-income households through federal programs administered by state offices, and also through private programs. Both home owners and renters are eligible for these programs, which can be found on the Department of Energy’s Web site.

Household Tips
There are a number of no- or low-cost methods Americans can use to save energy during the winter months. Simply reducing the thermostat by 10 to 15 degrees for eight hours a day – while you are out of the house or asleep – will help you save about 10 percent a year on your heating bill. A programmable thermostat can make it easy to set back your temperature. Because your water heater can account for 14 to 25 percent of the energy consumed in your home, consider turning down the temperature of your water heater to the warm setting of 120 degrees. Also consider having an energy audit of your home to determine if there are ways you can easily reduce your home-heating consumption.

Other Ideas:

Cover drafty windows with heavy-duty clear plastic film
Install tight-fitting, insulated drapes or shades
Take advantage of the heat from the sun by opening curtains on south-facing windows during the day
Find and seal air leaks
Stop cold air from coming down the flue of your fireplace by keeping the damper closed unless a fire is going
Consider replacing appliances and heating and cooling equipment with more energy efficient (Energy Star) models.
Schedule regular maintenance of your heating/cooling system, including replacing your furnace filter regularly
Insulate your water tank to hold the heat inside

Supply and Demand - 11/14/2008 11:36:21 AM

Fri, 14 Nov 2008 11:36:21 -0600

Most of us think of supply and demand in rather general terms. Typically, whether we’re at the supermarket, home improvement center or clothing store, we can readily find what we want. We also understand that some products can be limited in supply — or more subject to market conditions such as bad weather or work disruptions — so we have to pay more for them. These price fluctuations are often temporary. For instance, one week a head of cauliflower might be 99 cents while the next week, a hailstorm’s devastation in a cauliflower-growing region might double that price.

The same simple economic forces of supply and demand are at work every day in the world market for oil and natural gas. A finite supply is available each day to hundreds of thousands of buyers and sellers who compete with one another to secure enough to meet their customers’ demands.

Most of the factors that can drive oil and natural gas prices higher have occurred over several years. Strong economic growth in the United States and the world — particularly in Asia — has triggered rising demand while at the same time there have been impediments to developing available oil and domestic natural gas, as well as supply disruptions caused by hurricanes and other events.

Daily fuel prices reflect numerous long-term challenges. For instance, politicians have talked about energy independence for more than 30 years, but our nation imports twice as much oil as it did in the 1970s. America’s reliance on foreign oil has grown to 60 percent and continues to rise. However, the undiscovered oil off our coasts could replace current levels of Persian Gulf imports for almost 60 years – perhaps even longer.

A Fractional Story - 10/16/2008 9:58:14 AM

Thu, 16 Oct 2008 09:58:14 -0500

The biggest single component of retail gasoline prices is the cost of the raw material used to produce gasoline – crude oil. Crude oil alone makes up 74 percent of pump prices.

Refining the crude oil into gasoline and retailing accounts for 15 percent of the retail price. Taxes account for 11 percent of the price of gasoline.

Wendell Cox Biography - 6/24/2008 10:23:08 AM

Tue, 24 Jun 2008 10:23:08 -0500

demographia@gmail.com

Wendell Cox is principal of Demographia, a St. Louis area based public policy firm specializing in demographics, urban policy and transportation. He has completed projects in North America, Europe and Asia and has spoken around the world. He recently returned from Paris, where he serves annually as a visiting professor at the Conservatoire National des Arts et Metiers (CNAM), France's largest university.

Mr. Cox was commissioned by the congressional Millennial Housing Commission to prepare a policy report Smart Growth and Housing Affordability.

He was appointed to three terms on the Los Angeles County Transportation Commission (LACTC) by former Mayor Tom Bradley. The Commission oversaw transit and highway policy in the nation's largest county. Mr. Cox was the only non-elected official, serving with 10 elected officials, including the Mayor and the County Supervisors. During that assignment, he also served as chair of two national committees of what is now called the American Public Transportation Association.

Speaker Newt Gingrich appointed Mr. Cox to complete the unexpired term of New Jersey Governor Christine Todd Whitman on the Amtrak Reform Council, where he played a major part in fashioning a congressionally mandated reform program. He also served three years as the Director of Public Policy of the American Legislative Exchange Council.

Mr. Cox lectures widely, writes numerous commentary articles and is frequently interviewed by international, national and local media. His firm sponsors three websites, "demographia.com," on urban policy, "publicpurpose.com," on transportation policy and "rentalcartours.net," which contains his travelogues on more than 100 world urban areas including all with more than 10 million population.