Price at the Fuel Pump Facts and Myths Legislative Energy Horizon Institute Catherine Reheis-Boyd July 20, 2011
The energy conversation It s complex, it s crucial, it s interconnected 2
Myth: The world is running out of oil. 3
Fact: Estimates of global recoverable conventional oil resources have grown over time 4 Source: ExxonMobil, U.S. Geological Survey
Fact: USGS estimates global oil & gas endowment is 5.2 trillion barrels 13% has been used; 87% remains to be used and/or found 5 Source: U.S. Geological Survey World Petroleum Assessment 2000
Fact: Unconventional sources of oil continue to grow 6 Source: Strategic Significance of America s Oil Shale Resource, Office of Naval Petroleum and Oil Shale Reserves, U.S. Department of Energy Washington, D.C. March 2004
Fact: Many of the constraints on oil production are policy driven 7
Fact: Many of the constraints on oil production are policy driven 8
Daniel Yergin, President, Cambridge Energy Research Associates, author of Pulitzer Prize-winning book on oil, The Prize This is the fifth time that the world is said to be running out of oil. Each time whether it was the gasoline famine at the end of WWI or the permanent shortage of the 1970s technology and the opening of new frontier areas has banished the specter of decline. There s no reason to think that technology is finished this time. 9
Myth: Oil companies control the world s supply of oil 10
Fact: Oil companies control just 6% of world supply 11 Source: API, PFC Energy
Myth: Oil companies determine the price of crude oil 12
Fact: The price of crude oil is determined by global commodity markets New York Mercantile Exchange International Petroleum Exchange, London 13 Singapore International Monetary Exchange
Fact: Oil prices are linked to many uncertain factors 14 Source: API, U.S. Energy Information Administration
$130 $125 $120 Saudi Arabia March 2, 2011 $115 $110 $105 Tunisia Egypt Jan. 25, 2011 $100 $95 $90 $85 $80 Dec 01, 2010 Dec 08, 2010 Dec 15, 2010 Algeria Jan. 7, 2011 Dec 22, Dec 29, Jan 05, Jan 12, Jan 19, Jan 26, Feb 02, Feb 09, Feb 16, 2010 2010 2011 2011 2011 2011 2011 2011 2011 Feb 23, 2011 Mar 02, 2011 Mar 09, 2011 Mar 16, 2011 Libya Feb. 16, 2011 Mar 23, 2011 Mar 30, Apr 06, 2011 2011 15 Source: U.S. Energy Information Administration, Spot Price, Brent Crude Oil
Myth: Oil companies set the price of gasoline at the pump 16
Fact: Most gas stations are independently owned and operated Integrated oil company owned/operated 2,877 Independent owners and/or operators 64% Integrated oil company owned and operated 16% Independent refiner owned/operated 1,093 Refiner owned, leasee operated 2,617 Oil company owned, operated by leasee 14% Independent refiner owned and operated 6% Independently owned/operated 11,550 Total 18,137 17 Source: Lundberg Survey, Incorporated, all WSPA states, based on 2009 data
Myth: Gasoline prices go up like a rocket but come down like a feather 18
Fact: Retail gasoline prices follow wholesale prices (which, in turn, are driven by crude oil prices and other supply and demand factors) at virtually the same speed upward as they do downward. US Energy Information Administration/ 2003 California Gasoline Price Study Final Report $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 Crude Oil (WTI) $2.00 U.S. Gasoline $1.50 $1.00 West Cost Gasoline (PADD 5) $0.50 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 19
Myth: Oil companies make obscene profits 20
Fact: Oil company earnings average less than average manufacturing company earnings 21 Source: API, U.S. Census Bureau for U.S. manufacturing and Oil Daily for the oil and natural gas industry.
Fact: Oil & gas stocks are top performers in public pension funds Large public employee pension funds in 17 states have $1.1 trillion invested in oil and gas stocks Oil & gas investments returned an average of $1.42 for every $1 invested between 2005 and 2009 All other investments returned $1.06 for every $1 invested between 2005 and 2009 Source: API; The Financial Contribution of Oil and Natural Gas Company Investments To Major Public Employee Pension Plans in Seventeen States, 2005 2009: Robert J. Shapiro and Nam D. Pham, July 2011
Myth: High gas prices mean big profits for oil companies 23
Fact: Gasoline prices closely track crude oil costs $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 Crude Oil (WTI) U.S. Gasoline West Cost Gasoline (PADD 5) $1.50 $1.00 $0.50 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 24 Source: U.S. Energy Information Administration, Spot Price, West Texas Intermediate; Average weekly price U.S. gasoline and California gasoline July 2011
Fact: Crude oil and taxes are major cost components in a gallon of gasoline What We Pay For In A Gallon of Regular Gasoline May 2011 25 Source: U.S. Energy Information Administration, based on U.S. average cost for regular gasoline July 2011
Cents per Gallon Fact: West Coast taxes are among the highest in the nation 68.9 67.8 70 60 55.9 49.5 49.4 50 40 30 20 10 0 California Hawaii Washington U.S. Average Oregon 26 Source: API July 2011
Fact: Gasoline prices closely track crude oil costs Recent historic highs are the result of record crude oil prices and increasing worldwide demand for oil products Regional retail price differences are explained in part by differences in wholesale prices and to a larger degree by differences in retail supply costs and retail competition Source: 2007-08 Gas Price Study, Final Report, Conducted By Dr. Keith Leffler, Economist, University of Washington for the Washington State Attorney General 27
Myth: Oil companies are preventing development of alternative and renewable energy sources 28
Fact: Oil companies are major investors in low and zero emission technologies 29 Source: API, T2 & Associates and CEE, June 2009.
Fact: Oil companies are major investors in low and zero emission technologies 30 Source: API, T2 & Associates and CEE, June 2009.
Myth: Oil companies are not interested in a diversified energy portfolio 31
Fact: Global energy demand is rising 32 Source: U.S. Energy Information Administration, Annual Energy Outlook 2011
Fact: EIA projects by 2035, fossil fuels will still represent 81 percent of US energy supply 33
Fact: Public policies pose major challenges to energy supply 34
Billions of Gallons July 2011 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Fact: Public policies pose major challenges to energy supply 20 18 16 14 12 10 8 6 4 2 0 LCFS compliance period From Corn and Other Starch From Cellulose Net Imports 35 Source: U.S. Energy Information Administration, Annual Energy Outlook 2011, Renewable Energy Consumption by Sector and Source, Reference case
Millions of gallons Fact: Public policies pose major challenges to energy supply 1,600 1,400 1,200 Total US supply of lowcarbon biofuel forecast for 2015 1,000 800 600 400 200 Volume of lowcarbon ethanol needed to meet California demand in 2015 Cellulosic ethanol Imported ethanol 36 Source: July 2011 0 U.S. Energy Information Administration, Annual Energy Outlook 2011, Renewable Energy Consumption by Sector and Source, Reference case; California Energy Commission, Integrated Energy Policy Report, 2009
Fact: Public policies pose major challenges to energy supply 37
Fact: It s complex, it s crucial, it s interconnected 38
Fact: It s complex, it s crucial, it s interconnected 39