Compromise Energy Policy Within Reach

Tony Hayward, BP's Chief Executive
(Click to Enlarge)

(THE WALL STREET JOURNAL via Dow Jones Newswires), Feb. 26, 2009

Every U.S. president since Richard Nixon has expressed concern about America's growing dependence on imported oil. But effective action has proved elusive: Oil imports have more than doubled in the past 35 years -- from 30% at the time of the first oil shock in 1973 to around 65% today.

Yet the collapse in world energy demand and the fall of energy prices present a rare, once-in-a-generation opportunity. Congress and the Obama administration can work with energy producers to craft an energy policy that creates jobs, expands and diversifies the nation's energy supply, generates government revenue, and protects the environment.

Reaching those goals begins with rejecting the false choice between "drill, baby, drill" and a near-exclusive focus on alternative energies and conservation. An "all-of-the-above" approach holds far more promise.

President Barack Obama seems to recognize this. In his address to Congress this week, he spoke forthrightly about the need to tackle climate change -- while acknowledging the role of hydrocarbons in the overall energy mix, and emphasizing the need for energy security and efficiency. At BP we welcome his commitment to "invest $15 billion a year to develop technologies like wind power and solar power, advanced biofuels, clean coal and more efficient cars and trucks built right here in America."

BP has already demonstrated its commitment to a diverse energy portfolio. We're the largest producer of oil and gas in the U.S. We're also investing more than $8 billion over 10 years to develop solar, wind, hydrogen power and biofuels. We support energy conservation and efficiency, as well as addressing climate change via a cap-and-trade system to harness the power of the market to reduce CO2 emissions.

But if the country is to gain full value from the technology, knowledge and expertise possessed by BP and its major competitors, I'd like to offer policy makers a few suggestions.

First, energy providers and governments must have confidence in one another. An adversarial stance does nothing to increase the supply of energy. Regulatory policies need to be sensible, stable and right the first time.

Second, energy security can only be built on a solid foundation of free markets and free trade. Two-thirds of the world's oil is traded across international borders. This huge and agile market makes it possible to respond quickly to supply disruptions, such as hurricanes or political unrest. Tariffs, heavy taxes, or restrictions on the free movement of petroleum products interfere with that process.

Third, transitional incentives are needed to make low-carbon energy competitive with other energy sources, and to kick-start technologies for large-scale carbon abatement, such as carbon capture and storage. But these incentives should taper away over time, so costs are driven down and the market can take over as quickly as possible.

Finally, America must stop looking to others for the oil it needs and actively develop its own hydrocarbon endowment. Even with the rapid growth of alternatives, fossil fuels will continue providing most of the energy Americans consume for decades into the future.

The search for new sources of domestic crude has been constrained by a lack of access to promising areas, notably the Outer Continental Shelf (OCS). Resource estimates for closed areas exceed 100 billion barrels of oil, with 30 billion recoverable with today's technology and at today's prices.

Opening up the OCS would enhance America's energy security. Moreover, a new study by ICF International estimates that it could create as many as 76,000 new jobs and generate a total of nearly $1.4 trillion in new government revenue by 2030.

No one in the energy business thinks America can drill its way to energy security. But a policy based exclusively or even primarily on conservation and efficiency is a recipe for ongoing scarcity and economic decline.

The prize is great and the time is right. When the world economy begins to recover -- and it will -- demand for energy will rise and the moment will likely have passed. We are extending our hand. We hope Washington policy makers will grasp it.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Les Leonard | Feb. 28, 2009
I think Mr. Tony Hayward and the BP Co. have put forth the most common sense solution to our energy and oil problems we face in our country today. Now is the time to get it right before it is too late. Both the government and the oil industry must work together and get this done. One question I have is what about natural gas? We have a whole lot of it and more possible big finds. More cars and trucks should be converted to run on it. Just a thought.

George Schwalke | Feb. 27, 2009
Open them up, baby! Any person who is against drilling for oil any where and drives a car is the biggest phony there ever was.

Mike Cooley | Feb. 27, 2009
This is the best and most pro-active statement I have seen from the oil companies. I sincerely hope the US Government responds positively.

Randal Koonce | Feb. 27, 2009
I think you are "right on" ... hope all of what you have said/proposed comes to pass.

Mark Laurence | Feb. 26, 2009
The article "Compromise Energy Policy Within Reach" was well written and I hope what it proposes comes to fruition.

I spent a career at sea in the conventional Merchant Marine, and recently decided try something new but related, and went to Houston recently and took a Dynamic Positioning induction course.

I spent two months in Houston, totally immersing myself in learning about the offshore oil industry. I have become completely fascinated with what is being done, and how safely it is being done.

I say all this, because the offshore oil industry has an image problem, and has to my knowledge not successfully presented its case to the Citizens of this country.

There is a minority of people in the United States that want to have their cake and eat it to, and that same group of people (whom themselves benefit from inexpensive energy) has been able to give Offshore Oil a stigma it does not deserve.

A well thought out PR campaign is needed to change opinions of the Offshore Oil Industry from one of distrust to one of admiration. (the nuclear industry faces the same problem)

The recent decision of California to again reject drilling off its shores is a perfect example of why a proper PR campaign is needed. Even the people in California will come to the correct conclusion if the truth is presented accurately and in a way that stimulates their imagination.

The Offshore Oil Industry is exciting, fascinating, and opening up areas of the OCS will have a tremendous positive economic impact. The Citizens of this country need to hear that message.


Mark Laurence

Dorris Cragg | Feb. 26, 2009
Every stock mutual fund shareholder and/or retirement plan participant is automatically part-owner of Big Oil -- and most of them don't know it! Oil companies must quickly identify and organize this huge influential voting bloc before we and our capitalistic system fall victim to Obama socialism! We need Big Oil to fight back for us in its advertising and PR!

Brian Amburn | Feb. 26, 2009
They just didn't pull this guy's name out of a hat. He is absolutely correct, and I only wished the new administration would follow his advice. As far as BP, I wish they would conduct their business on a more level playing field. BP uses large service companies and shuts the smaller, sometimes much more efficient vendors out. I own a small drilling fluids company and BP will not even consider using us, even if we can provide a more efficient and effective service. All companies should have an equal opportunity to work for these big companies, but that is not the case.


Brian Amburn

Mega Fluids

Pedro | Feb. 26, 2009
Well done. BP & Tony Hayward deliver an excellent speech once again. It all sounds great. However, BP's $8B for renewables over 10 years isn't really game changing investment capital. Put it in prospective with what we know Atlantis or Thunderhorse cost (both GoM). Still, well done BP you're on the right track to be an Energy company, rather than just an Oil company.

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