Senate hearing explores oil, energy outlook

By Kris Bevill | February 03, 2011

The U.S. Senate Committee on Energy and Natural Resources held an oversight hearing Feb. 3 to discuss the energy and oil market outlook. The ongoing turmoil in Egypt and elsewhere in the Middle East was referenced frequently as a reminder that the U.S. needs to address its dependence on foreign oil sources. “Whenever geopolitical events remind us of our vulnerability to world oil supply disruptions, it is a spur for us to consider energy policies that help to reduce that vulnerability,” Committee Chairman Jeff Bingaman, D-N.M., said.

Richard Newell, U.S. DOE Energy Information Administration administrator, testified that U.S. demand for oil likely peaked in 2005. Consumption of liquid fuels is expected to grow in the next 20 years, but demand increases will be satiated by biofuels and natural gas liquids, he said. The EIA’s long-term energy outlook projects that renewable fuels will be the fastest growing energy source and predicts the industry will grow at a rate of 3 percent each year for the next two decades, he said. However, the agency’s outlook for cellulosic biofuels is not as optimistic. “Although the situation is uncertain, EIA’s present view of the projected rates of technology development and market penetration of cellulosic biofuel technologies suggests that available quantities of cellulosic biofuels will be insufficient to meet the renewable fuel standard (RFS) targets for cellulosic biofuels legislated in EISA2007 before 2022,” Newell said.

Other members of the witness panel, including International Energy Agency Deputy Executive Director Richard Jones and energy advisors Roger Diwan and Jim Burkhard, also testified that oil supplies are dwindling and global demand is increasing. The panel suggested greater use of renewable fuels such as biofuels and natural gas liquids, improved energy efficiency measures and advanced vehicle technologies to reduce U.S. oil demand.

Several senators questioned whether President Barack Obama’s call to end oil subsidies would have any impact on the price of oil. Newell said the EIA has not yet evaluated that scenario. Jim Burkhard, managing director of Cambridge Energy Research Associates, cautioned that U.S. oil firms must compete with companies on an international level, and higher domestic taxes could interfere with their ability to do so. Sen. Al Franken, D-Minn., stated that the five largest oil companies made over $1 trillion in profits in the last decade, rhetorically asking, “Doesn’t this sound like an industry that doesn’t need tax benefits to survive?”

Franken also questioned whether the oil industry’s commitment to renewables is as solid as their marketing campaigns suggest. “I felt great about BP,” he said. “It had the whole green thing, it was ‘beyond petroleum.’ And then we learned BP had the worst safety record of any of these oil companies. So how much are they really investing in alternative energy?” One of the witnesses, Roger Diwan, partner and head of financial advisory for PFC Energy, responded that oil companies such as Exxon Mobile Corp., which is the largest company in the world, can make investments that would be considered major for the renewables industry but would not be considered material investments for oil companies. However, because of their size, oil companies are not nimble enough to make advancements in biofuels and other technologies, he said, and would therefore rather invest large amounts of money into researching new oil production technologies. “They are not biofuels companies, they are not solar companies, and they never will be,” Diwan said. “We can’t ask them to be what they’re not.”