Dear friends,

Welcome to the May 2008 issue of BIC.  

Last month, the leaders of the five largest oil and gas companies in the United States were called to testify before Congress in order to be chastised for making a record or near record profit. It now seems like an annual rite of spring. Oil executives are called to answer for their profitability. It seems crazy to me to look to our nation’s oil companies as scapegoats for the current market conditions.

Oil and gasoline prices are high. The reason is not complicated. Demand has outstripped U.S. capacity to produce. According to the U.S. Energy Information Administration, in 1995 drivers used about 17 million gallons of gas per day more than was produced domestically. A decade later, the gap had more than doubled. To make up for the difference, we buy crude from producers. But since crude is auctioned to the highest bidder worldwide, U.S. companies end up paying what the market will bear.   

Many people don’t know that the United States generates 98 percent of its electricity from nonoil sources, using other fuels instead. Coal and natural gas make up 70 percent of our electrical supply; the rest is from nuclear, hydro and renewables. Electricity demand is another issue that can’t be covered in this space. Suffice it to say that transportation is by far the biggest usage of oil. I bring it up mainly to underscore the potential of electric cars to alleviate the demand for gasoline.

Global demand for oil and gas from developing countries like India and China is expected to increase by 50 percent in the next several decades. Further, per the widely accepted theory of peak oil, world production of oil has either maxed out in 2005 or will max out in the next decade depending on whose prediction one chooses to believe.

Worldwide pressures on supply and demand and domestic supply and demand issues are almost completely out of “Big Oil’s” control. And consider this: In 2007, oil and gas companies earned an average of 8.3 cents per dollar of sales. Not an amazing number, is it?  

Politicians are loath to embrace policy that is seen as benefiting oil companies. They worry about the consequences of energy (typically environmental issues) rather than the creation of it. All three presidential candidates have an energy policy that includes conservation. All three support legislation to curb U.S. emissions of greenhouse gases. Instead of hyper-scrutinizing the profitability of the oil industry, and putting emphasis on consequences, our government (and citizenry) would be better served to focus on what is within our country’s power to achieve.  

As I see it, the biggest energy issue for our country isn’t the pricing at the pump, it’s the fact that we import so much oil from other countries, especially from countries that don’t really like us. It is a matter that affects national security at the foremost and our gross domestic product secondarily. We should develop more domestic supply and develop new American energy sources, mainly to create more jobs in our country and so we don’t have to be reliant on the Middle East.

John Lowe, ConocoPhillips’ executive vice president of exploration and production, estimates that the U.S. Outer Continental Shelf off the East and West Coasts are estimated to hold 80 billion barrels of recoverable oil and natural gas equivalent — enough to double current U.S. reserves. Yet drilling is banned in those areas by U.S. policy. 

According to the Heritage Foundation, we are “the only nation in the world that has placed a significant amount of its potential domestic energy supplies off-limits.”

Even as we plead with other nations to give us access to their reserves of hydrocarbons, we resist new exploration off our East and West Coasts. This is hypocrisy at its worst. When Hurricanes Katrina and Rita ripped though the offshore rigs in the Texas and Louisiana area, there was no major oil spill offshore. We have proved that offshore exploration can be done in an environmentally safe fashion.

Meanwhile, our oil imports have risen to approximately 12 million barrels daily. Our net imports almost equal the total combined production of Saudi Arabia and Kuwait. We should be doing more to raise our U.S. production.

Realistically, we can’t gin up enough biofuel production in the next five years to make a sizable dent in our oil consumption. Further, Congress must stop mandating the use of ethanol made from corn for auto fuel. The net gain in energy is small, while the demand for corn disrupts food markets and needlessly raises prices at the grocery store. When ethanol from switchgrass and other biomass becomes profitable, then it can play a meaningful role in our energy mix. Automobiles running on renewable energy from wind, solar and biomass do not hold enough promise to make a material impact in the energy supply and demand mix in the next 10-20 years.

Yes, we should pursue an energy mix that includes renewables and encourages conservation. However, the most powerful thing our country can do is address the short term by opening U.S. lands to exploration and production and address the long term by organizing and giving incentive to the next generation of researchers to develop new technologies for everything from carbon sequestration to renewables to electric cars to safe nuclear waste disposal, á la our push for the Apollo mission to the moon.

In this issue of BIC, industry executives share their insight on the current state of their business. NPRA President Charles Drevna discusses the politics of the petrochemical and refining industry while Bayer’s Jim Newport focuses on topics of a competitive nature, such as the cost of natural gas. Profiles in this issue feature Ronnie Wills, president of Aggregate Technologies, and Jody Toman, operations manager of Carbon Steel Inspection Inc.

As with each issue of BIC, you will also find the latest on current legislation affecting industry, as well as turnaround best practices and tips for safety both on the job and off. You can also read up on the energy platforms of Democratic presidential hopefuls Barack Obama and Hillary Clinton.

We hope that you enjoy all that this issue of BIC has to offer and that you will share this copy with your friends, family and co-workers, or please refer them to www.bicmagazine.com, where BIC can be read online in its entirety.

BIC Alliance and IVS will host several events in the coming months. We will co-host our annual hospitality and networking function Tuesday, May 20, from 8:15-11:15 p.m. The event will be held in Salon del Rey at the Hilton Palacio del Rio in San Antonio during the week of the NPRA Reliability & Maintenance Conference and Exhibition. We hope to see you there!

To contact Thomas, you can e-mail him at tbrinsko@bicalliance.com.

Inaugural Breakfast Meeting and Planning Session
Christian Refining & Petrochemical Workers’ Fellowship
7:30 a.m.,  June 3, 2008, Hilton Hobby Airport, Houston, TX
This new fellowship will seek to honor God and provide a ministry to workers and families of victims of occupational accidents.
For more information or to RSVP, please contact Brian Horner of Marketplace Chaplains USA at  (281) 286-7723 or Thomas Brinsko of BIC Alliance at (281) 538-9996.