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My recent blog post noted that Oil & Gas has profited considerably from their donations to political campaigns in contrast to Alternative Energy that did not fair as well based on  their unimpressive campaign contributions. This posts summarizes follow up activities to campaign donations, namely lobbying (i.e., “I donated money to your political campaign. Now that you are elected, here is what I want.”)

Although there is nothing new about lobbying per se, lobbying by Oil & Gas has reached epic proportions as indicated in the table below. This table only lists lobbying expenditures in excess of $1M for 2012, where as the total lobbying for that year amounted to more than $138M with 195 Oil & Gas organizations seeking tax and regulatory favors. There were a total of 764 lobbyists. This data was obtained from OpenSecrets.org.

Lobbying (i.e., influence peddling) could be greatly reduced if those in Congress were elected for only one term (e.g., 6 years), along with stringent campaign spending limits. There are such limits in Canada, and without them or something similar in the United States, a smaller, critical industry (i.e., Alternative Energy), will be less likely to achieve independent commercialization status. Germany and China certainly recognize this reality in the Alternative Energy space.

Table: Oil & Gas Industry Lobbying in 2012

In a recent blog post, I noted that Alternative Energy (i.e., wind, solar) would most likely receive considerably increased R&D funding from Congress if that industry  donated vastly more campaign money to Congressional fundraising. For example, Oil & Gas has reaped favorable tax treatment from Congress compared to Alternative Energy due to their  generous political campaign contributions.  To a great extent, U.S. energy policy is heavily influenced by supporting politicians in their pursuit of elected office and not on  national survival related to developing viable renewable energy technologies. Fossil fuels are finite. What energy sources will sustain your grandchildren?

In contrast, the German government has devoted considerable resources to developing solar energy technologies as the post below indicates. This post was obtained from  Being Liberal. The United States could follow a similar renewable energy path if there were political campaign spending limits and congressional term limits in order to suppress the control that Oil & Gas has over Congress.

Table 1 below compares energy production from Oil & Gas with Alternative Energy that includes solar, wind, hydro, geothermal and bio mass. Not contained in this list are coal and nuclear. Shown in the table are political campaign expenditures made by Oil & Gas and Alternative Energy organizations. Political campaign contribution data was derived with appreciation from OpenSecrets.org.

The ratios line in the table shows that Oil & Gas spent far more on political campaign donations than Alternative Energy by 28 to 1. On the other hand, Oil & Gas produced more energy than Alternative Energy by more than 7 to 1.

Table 1. Lobbying Versus Energy Production

Political campaign money spent by Oil & Gas pays handsomely. Consider tax breaks for example:

Oil Companies’ $21 Billion U.S. Tax Break Survives Repeal Effort in Senate

Oil Industry Revives Campaign to Avoid Losing Tax Breaks

Tax Breaks – Big Oil Makes Massive Profits whilst the Federal Budget Struggles

In contrast, wind Alternative Energy received far less consistent Congressional support compared to Oil & Gas:

Production Tax Credit For Wind Power Saved, For One Year

Assessing the Wind Production Tax Credit

Wind Gets Production Tax Credit for Another Year With Crucial Language Change

Conclusions:

• Congress is for sale.

• Alternative Energy might be more successful if it matched political campaign money donated by Oil & Gas. More Alternative Energy influence money might “buy” increased R&D funding from Congress needed by that industry to become commercially viable. Oil & Gas is a technically mature industry and needs little governmental R&D funding or massive tax breaks.

• Oil & Gas influence money (i.e., Congressional/Presidential campaign donations) detract from what ought to be the primary energy mission of the United States: insuring the long term survivability of this country with Alternative Energy. Non-renewable energies will eventually decline to a level where they are unaffordable.

“Good” News

The table below summarizes U.S. crude oil production and imports for 2010 and 2012. Notice that imports decreased by nearly 7 percent, while oil production ramped up by almost 28 percent during that 2-year interval.

It is noteworthy that the sum of imports and production increased by about 5 percent. Thus, no oil conservation occurred, a regrettable fact for a non-renewable resource.

The ratio of imports/total oil consumption decreased by 7 percent from 65 percent to 57 percent. Nevertheless, U.S. dependency on crude oil imports is about 60 percent.

The numbers in each cell block are billions of barrels of oil. They are the result of taking an average for each year in 2010 and 2012. Essentially, the United States consumes more than 5 billion barrels of oil annually, an unsustainable level for the long term, maybe even the intermediate period.

U.S. Oil Summary Statistics for 2010 and 2012

Bad News

The graph below is a typical theoretical oil production curve for multiple oil fields. Notice the initial rise in production that reaches a plateau, followed by an inevitable decline. There are many oil fields throughout the world that display this rise and decline behavior.

• Why should the Bakken field in North Dakota behave any differently than numerous other oil fields?
• When the Bakken field becomes uneconomical to produce, where is the next such field to prop up our insatiable oil consumption for ever expanding economic growth?
• What happens when there are no more Bakkens?

The United States is undergoing an upsurge in crude oil production as shown by the first and second headlines below. Further, this significant production uptick permits east coast refineries to utilize less expensive crude oil obtained by horizontal drilling and “fracking” from the Bakken region in North Dakota (See the third headline) in contrast to more costly, imported crude oil pegged at the Brent index. These first three headlines constitute “Drill, Baby Drill” (i.e., a useless Republican mantra on energy “policy”).

In spite of this domestic crude oil “glut,” U.S. gasoline prices at the pump are increasing almost daily. A possible explanation, albeit incomplete, is that some refineries are currently shut down for seasonal maintenance according to the fourth headline.

A more compelling explanation for sky rocketing gasoline prices is due to ever increasing gasoline exports (See the fifth and sixth headlines). Gasoline exports were the subject of one of my previous blog posts. Obviously, less domestic supply caused by exports would tend to have an inflationary effect on gasoline consumption, which has remained more or less constant during the period over which gasoline prices have climbed.

Summary: Energy companies will do whatever it takes to maximize profits and shareholder value. However, please don’t insult my intelligence with the disingenuous phrase, “Drill, Baby Drill.” It does nothing for the average worker’s gasoline costs and keeping the environment safe from “fracking” pollution.

1. U.S. Oil-Production Rise Is Fastest Ever

Wall Street Journal, 11/18/13

“U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013.”

2. Better Days Ahead For North American Oil Producers

Forbes, 2/1/13

“Over the past four years, US oil production has posted strong gains after nearly 40 years of steady declines. US oil production rose above the 6 million barrels per day (bpd) mark in late 2011 for the first time since 1998, according to the Energy Information Administration (EIA). By the end of last summer, production had risen by another half million bpd.”

3. US shale oil reviving East Coast refineries

Boston Globe, 2/17/13

“A year ago, the shutdown of several refineries serving the Northeast and the possibility they would not reopen threatened to boost New England’s already­ high gasoline prices by as much as 15 cents a gallon. But an influx of cheaper crude oil extracted from shale rock formations in the United States has helped save most of those facilities and stabilized gas ­prices.”

4. Gasoline Prices Set to Keep Rising with Summer Blend Switch

Wall Street Journal, 2/15/13

“Futures prices on the New York Mercantile Exchange have zoomed to their highest levels since late September on concerns that seasonal refinery maintenance will reduce production and drive up prices, as more drivers take to the roads when the weather warms.”

5. U.S. fuel exports grow to historic levels

Los Angles Times, Nov. 12, 2012

“Energy experts say increased fuel exporting by U.S. refiners is one of the reasons that gasoline and diesel prices have been so high.”

6. The Effects of Surging Gasoline Exports

InvestorPlace, August 8, 2012

 “Refineries make money on the “crack spread,” or the difference between the price of crude oil and the gasoline, jet fuel and other petroleum products that are extracted from it. Higher oil prices coupled with dwindling demand crippled refiners’ margins, and many firms within the sector struggled.”

“However, times are a-changin’ for the downstream sector. The refiners are realizing a huge boost to their bottom lines, not only from lower crude oil prices — but from exporting record amounts of gasoline.”