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Strategic Petroleum Reserve and Refined Product Reserves: Authorization and Drawdown Policy [March 11, 2011]"Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a repetition of the economic dislocation caused by the 1973-1974 Arab oil embargo. The Department of Energy (DOE) manages the SPR, which comprises five underground storage facilities, solution-mined from naturally occurring salt domes in Texas and Louisiana. The Energy Policy Act of 2005 (EPAct) authorized SPR expansion to a capacity of 1 billion barrels, but physical expansion of the SPR has not proceeded beyond 727 million barrels �"� its inventory at the end of 2010. In addition, a Northeast Home Heating Oil Reserve (NHOR) holds 2 million barrels of heating oil in above-ground storage. EPCA authorized drawdown of the Reserve upon a finding by the President that there is a 'severe energy supply interruption.' Congress enacted additional authority in 1990 (Energy Policy and Conservation Act Amendments of 1990, P.L. 101-383) to permit use of the SPR for short periods to resolve supply interruptions stemming from situations internal to the United States. The meaning of a 'severe energy supply interruption' has been controversial. EPCA intended use of the SPR only to ameliorate discernible physical shortages of crude oil. The government had ended the practice of purchasing crude oil to fill the SPR in 1994. In 2000, the Department of Energy began acquiring SPR oil through royalty-in-kind (RIK) in lieu of cash royalties paid on production from federal offshore leases. In May 2008, Congress passed legislation (P.L. 110-232) ordering DOE to suspend RIK fill for the balance of the calendar year unless the price of crude oil dropped below $75/barrel. Crude oil prices spiked to $147/barrel in the summer of 2008 and then sharply declined, allowing a resumption of fill. These activities have brought the SPR essentially to its current 727 million barrel inventory. The current Secretary of the Interior recently announced his intention to terminate the RIK program."Library of Congress. Congressional Research ServicePirog, Robert L.; Andrews, Anthony2011-03-11
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U.S. Oil Refining Industry: Background in Changing Markets and Fuel Policies [November 22, 2010]"A decade ago, 158 refineries operated in the United States and its territories and sporadic refinery outages led many policy makers to advocate new refinery construction. Fears that crude oil production was in decline also led to policies promoting alternative fuels and increased vehicle fuel efficiency. Since the summer 2008 peak in crude oil prices, however, the U.S. demand for refined petroleum products has declined, and the outlook for the petroleum refining industry in the United States has changed. In response to weak demand for gasoline and other refined products, refinery operators have begun cutting back capacity, idling, and, in a few cases, permanently closing their refineries. By current count, 124 refineries now produce fuel in addition to 13 refineries that produce lubricating oils and asphalt. Even as the number of refineries has decreased, operable refining capacity has actually increased over the past decade, from 16.5 million barrels/day to over 18 million barrels/day. Cyclical economic factors aside, U.S. refiners now face the potential of long-term decreased demand for their products. This is the result of legislative and regulatory efforts that were originally intended, in part, to accommodate the growing demand for petroleum products, but which may now displace some of that demand. These efforts include such policies as increasing the volume of ethanol in the gasoline supply, improving vehicle fuel efficiency, and encouraging the purchase of vehicles powered by natural gas or electricity."Library of Congress. Congressional Research ServiceSherlock, Molly F.; Andrews, Anthony; Pirog, Robert L.2010-11-22
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U.S. Offshore Oil and Gas Resources: Prospects and Processes [May 4, 2011]"Access to potential oil and gas resources under the U.S. Outer Continental Shelf (OCS) continues to be controversial. Moratoria on leasing and development in certain areas were largely eliminated in 2008 and 2009, although a few areas remain legislatively off limits to leasing. The 112th Congress may be unlikely to reinstate broad leasing moratoria, but some Members have expressed interest in protecting areas (e.g., the Georges Bank or Northern California) or establishing protective coastal buffers. Pressure to expand oil and gas supplies and protect coastal environments and communities will likely lead Congress and the Administration to consider carefully which areas to keep open to leasing and which to protect from development. [...] The oil spill that occurred on April 20, 2010, in the Gulf of Mexico brought increased attention to offshore drilling risks. Consideration of offshore development for any purpose has raised concerns over the protection of the marine and coastal environment. In addition to the oil spill, historical events associated with offshore oil production, such as the large oil spill off the coast of Santa Barbara, CA, in 1969, cause both opponents and proponents of offshore development to consider the risks and to weigh those risks against the economic and social benefits of the development."Library of Congress. Congressional Research ServiceHumphries, Marc; Pirog, Robert L.; Whitney, Gene2011-05-04
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U.S. Offshore Oil and Gas Resources: Prospects and Processes [April 26, 2010]"Access to potential oil and gas resources under the U.S. Outer Continental Shelf (OCS) continues to be controversial. Moratoria on leasing and development in certain areas were established by Congress (beginning in 1981) and by the President (beginning in 1990). These moratoria were largely eliminated in 2008 and 2009, although a few areas remain legislatively off limits to leasing. The 111th Congress may be unlikely to reinstate broad leasing moratoria, but some members have expressed interest in protecting areas (e.g., the Georges Bank or Northern California) or establishing protective coastal buffers. Pressure to expand oil and gas supplies and protect coastal environments and communities will likely lead Congress and the Administration to consider carefully which areas to keep open to leasing and which to protect from development. On April 2, 2010, the Obama Administration announced Preliminary Revised Program (PRP) for the remainder of the 2007-2012 OCS Leasing Program. […]. Consideration of offshore development for any purpose may raise concerns over the protection of the marine and coastal environment. […]. One characteristic of the U.S. oil market, as well as of world oil markets, is that the access to supply tends to be sequential. Normally, the first source of oil used by a nation is domestic production, if available. Typically, the next source of supply is imports from countries not party to the Organization of the Petroleum Exporting Countries (OPEC). Finally, residual demand is met by OPEC."Library of Congress. Congressional Research ServiceHumphries, Marc; Pirog, Robert L.; Whitney, Gene2010-04-26
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Strategic Petroleum Reserve: Possible Effects on Gasoline Prices of Selected Fill Policies [April 19, 2004]"This report examines the factors that are currently influencing crude oil and gasoline prices, and reviews the extent to which prices might be correlated with SPR [Strategic Petroleum Reserve] fill policy. If RIK [royalty-in-kind] oil was released to the market, gasoline prices might be affected. Since crude oil is a raw material in the production of gasoline, a reduction in the price of oil might pass through to the price of gasoline. To the extent that the capacity to refine additional barrels of crude directed to the market exists, and the diverted RIK oil is not offset by reduced crude oil imports, consumers might benefit. However, the amount of RIK oil, relative to the total market, is small, and when coupled with other market dynamics, the effect of changes in SPR fill policy on crude and product prices could be only minimal. Conditions in the gasoline market, including strong demand, high refinery capacity utilization rates, fragmented regional gasoline specifications, scarce, high cost imports as well as low current inventory levels point to the continuation of high gasoline prices even if oil prices decline somewhat. Although the price of oil influences, and is a component of, the price of gasoline, a complex interaction of many factors determines price."Library of Congress. Congressional Research ServiceBamberger, Robert; Pirog, Robert L.2004-04-19
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World Oil Demand and its Effect on Oil Prices [Updated June 9, 2005]"The price of oil began rising in October 2003 and reached record levels in 2004 and again in 2005. As a result of these price increases, consumers' budgets have been under pressure, business costs have risen, and oil producers' profits have increased. The 109th Congress is considering broad energy legislation (H.R. 6), that addresses conditions in the oil and petroleum products markets. A long term explanatory factor for increasing oil prices could be the decline of the world reserve base. The reserves to production ratio is the measure which indicates the world's ability to maintain current production, based on proved reserves. Over the past decade there has been little change in the reserve to production ratio, suggesting that, at least for now, long term forces are not driving up the price of oil. A wide variety of cyclic and short term factors have converged in such a way that the growth of demand has been unexpectedly high causing upward pressure on oil prices. Those factors which have been identified as contributing to the high price of oil include the resumption of relatively rapid growth rates of gross domestic product in many countries around the world, a declining value of the U.S. dollar, gasoline prices, the changing structure of the oil industry, OPEC policies, and the persistently low levels of U.S. crude oil and gasoline inventories."Library of Congress. Congressional Research ServicePirog, Robert L.2005-06-09
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Winter Fuels Markets [October 21, 2008]This CRS report looks at winter fuel markets. "The Energy Information Administration in its Short-Term Energy and Winter Fuels Outlook (STEWFO) for the 2008-2009 winter heating season warned consumers of the likelihood of higher heating costs. Average expenditures for those heating with natural gas might see their expenditures rise by more than 18%. Home heating oil expenditures were forecast to rise by 23%, propane expenditures by 11% and electric heating expenses by 10%. The forecasted increases in total expenditures result from higher prices for all energy sources, as well as the expectation of a colder winter than the past several years. Oil markets have experienced downward volatility recently, with the price of crude oil falling almost 50% compared to the peak price reached in June 2008. If the downward trend in oil prices continues through the winter 2008-2009 heating season, or stabilizes at a lower level, the increased expenditure estimates of the STEWFO might not materialize. This is because the price of oil is a major factor in all the home heating prices surveyed in the STEWFO. The price of oil directly affects the prices of heating oil and propane, which are petroleum products. The price of oil indirectly affects the price of natural gas, and also, therefore, electricity through a historical price parity relationship."Library of Congress. Congressional Research ServicePirog, Robert L.2008-10-21
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Strategic Petroleum Reserve: Possible Effects on Gasoline Prices of Selected Fill Policies [Updated September 27, 2004]"Conditions in the gasoline market, including strong demand, high refinery capacity utilization rates, fragmented regional gasoline specifications, and scarce, high-cost imports, as well as the need to build inventories, point to the continuation of high gasoline prices even if oil prices decline somewhat. Although the price of oil influences, and is a component of, the price of gasoline, a complex interaction of many factors determines price. A drawdown of the SPR [Strategic Petroleum Reserve]- in addition to a deferral of RIK [royalty-in-kind] fill- is a further policy option, but is not analyzed in depth here. Benefits might vary, depending upon the ability of refineries to absorb additional crude, and the amount of additional crude made available. However, if one considers that refining capacity is already strained and unlikely to benefit from extra crude supply, any softening in oil prices from a drawdown would be unlikely to be passed along in full to consumers. This report will be updated as events warrant."Library of Congress. Congressional Research ServiceBamberger, Robert; Pirog, Robert L.2004-09-27
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Role of Federal Gasoline Excise Taxes in Public Policy [August 16, 2011]"American drivers, compared to those in industrialized nations in Europe, pay relatively low federal, state, and local gasoline and diesel excise taxes. The federal taxes are used specifically to fund annual highway construction, maintenance, and mass transit. Over the years, proposals have come forth to raise the federal tax as a way to address long-standing national policy concerns, including U.S. dependence on imported oil and various environmental problems related to large volumes of gasoline consumption. The current federal gasoline tax legislation is set to expire on September 30, 2011, and renewal of the tax could be controversial. Policy attention on the role of the gasoline tax has also increased recently due to two major developments. First, the 2008 and 2011 oil and gasoline price run-ups and continuing effects of the economic downturn have periodically led to a decline in gasoline tax revenues available for needed highway construction and maintenance. Second, the volatility of gasoline prices has affected investment planning (e.g., for alternative fuels and vehicles) and arguably contributed to the troubles facing domestic automobile manufacturers. […] Depending on the specified purpose of a new gasoline tax increase, it could be modest, or more significant. Because the demand for gasoline is quite price insensitive (inelastic), significant revenues could be generated with little change in real consumption, even with a relatively low tax increase. A more substantial tax increase would likely be needed to change consumer preferences and business investment decisions. Any debate on modifying the gasoline excise tax will likely revolve around these tensions."Library of Congress. Congressional Research ServicePirog, Robert L.2011-08-16
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Winter Fuels Outlook 2011- 2012 [November 14, 2011]"The Energy Information Administration (EIA), in its 'Short-Term Energy and Winter Fuels Outlook' (STEWFO) for the 2011-2012 winter heating season, projects that American consumers should expect to see heating expenditures that on average will be somewhat higher than last winter. Average expenditures for those heating with natural gas are projected to increase by 2.6%, while those heating with electricity are projected to see a decline in expenditures of about 0.6%. These two fuels serve as the heating source for about 88% of all U.S. household heating. Propane and home heating oil consumers are also projected to see increased expenditures. Within the U.S. average projections, differences exist with respect to region of the country and type of fuel. Economic conditions of slow growth and relatively high unemployment suggest that lower consumption of all fuels may occur, especially in the context of milder winter weather conditions as forecast by the National Oceanic and Atmospheric Administration (NOAA). While the price of natural gas has been relatively low, the price of oil has been relatively high over the past year. If the price of oil spikes for an extended amount of time, or if the price of natural gas increases, heating costs might be expected to rise above projected levels for many consumers. Lower prices could reduce seasonal heating expenditures. Uncertainty exists with respect to the status of funding for the Low Income Energy Assistance Program (LIHEAP), the key federal program assisting low-income households with heating expenditures. Funding for the Department of Labor and the Department of Health and Human Services has to be resolved by Congress (S. 1599, H.R. 3070). It has not been announced whether the CITGO [Citgo Petroleum Corporation] program to assist some U.S. heating oil consumers will be continued."Library of Congress. Congressional Research ServicePirog, Robert L.2011-11-14
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Use of Profit by the Five Major Oil Companies [April 11, 2008]"The price of crude oil began to increase in the last quarter of 2003, and has led to the high prices observed from 2004 through 2007. The Iraq War, unexpectedly high demand growth in China, India, and the United States, and Hurricanes Katrina and Rita, along with a number of other factors, all contributed to the rising price. An important result of these largely unexpected events was that the oil industry, as represented by the five major integrated oil companies doing business in the United States, experienced rapidly expanding revenues and profits. Some observers characterized these profits as 'windfall' gains, while others pointed to the increasing scarcity and rising costs observable in the oil industry. Some saw 'price gouging' in high gasoline prices, while others saw the market working to avoid physical supply shortages. […] This end might be accomplished through dividend payments and share repurchase plans. Profits might also be used to improve the balance sheets of the companies through debt reduction, potentially improving their financial health should they face a downturn in the market in the future. Until the effects of corporate plans that reflect a market characterized by higher oil prices can be observed, profits might tend to build up as cash reserves, as experienced by some of the five firms since 2004. How the profits generated over the past four years are used will help to determine whether oil and petroleum product markets remain tight with high prices, or whether they loosen, develop extra capacity, and lead to moderating prices. This report will be updated."Library of Congress. Congressional Research ServicePirog, Robert L.2008-04-11
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Disparity Between Retail Gasoline and Diesel Fuel Prices [March 31, 2008]"Over time, gasoline has typically been more expensive than diesel fuel. However, their relative prices have now reversed. In mid-March of 2008, gasoline prices exceeded $3.39/gallon (gal) while diesel fuel prices were above $3.97/gal, a differential of almost $0.60/gal. This has prompted questions of why the historic gap between gasoline and on-highway diesel prices has widened so greatly and over such a relatively brief period of time. Crude oil, when refined, produces a mix of products. Diesel fuel and home heating oil are derived from the portion of the barrel that produces what are termed 'middle distillates.' Another part of the barrel furnishes the feedstock for gasoline. Refiners process barrels of crude oil of differing quality, depending on the relative prices for oil of different qualities, and their available technology. Within technology-defined limits refiners can vary the proportions of middle distillate and gasoline production. Because the entire range of petroleum products derive from the same barrel, it is difficult to attribute general refining costs to any single product, making it also difficult to ascertain the relative cost proportions. The exception to this would be when the investment costs of changing product specifications to meet seasonal or environmental requirements can be measured. […] One other factor should be noted. The primary demand sectors for gasoline and diesel fuel are different in the United States. Gasoline is a mass consumer good and home heating oil an important regional and seasonal residential product, while diesel fuel is used in a wide variety of commercial and industrial applications. Diesel fuel is often part of the cost of delivering goods and providing services. As a consequence, demand for diesel fuel may be less elastic, and therefore, likelier to be passed on to consumers."Library of Congress. Congressional Research ServiceBamberger, Robert; Pirog, Robert L.2008-03-31
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Keystone XL Pipeline Project: Key Issues [November 5, 2012]"In May 2012, Canadian pipeline company TransCanada reapplied to the U.S. Department of State for a Presidential Permit to build the Keystone XL pipeline. The pipeline would transport crude oil from the oil sands region of Alberta, Canada, to the existing Keystone Pipeline System in Nebraska. It also could accept U.S. crude from the Bakken oil fields in Montana and North Dakota. A second segment of the Keystone XL pipeline system, the Gulf Coast Project, is proceeding separately to connect existing pipeline facilities in Oklahoma to refineries in Texas. When completed, the entire Keystone XL pipeline system would ultimately have capacity to transport 830,000 barrels of crude oil per day to U.S. market hubs. TransCanada submitted the May 2012 permit application after its 2008 Keystone XL permit application was denied. The State Department has jurisdiction over the Keystone XL pipeline's approval because it would cross the U.S. border. Before it can approve such a permit, the department must determine that the project is in the 'national interest,' accounting for potential effects on the environment, economy, energy security, and foreign policy, among other factors. Environmental impacts are considered under the National Environmental Policy Act, as documented in an Environmental Impact Statement (EIS). For the 2008 permit application, a final EIS was issued in August 2011, followed by a public review period. Largely in response to public comments and efforts by the state of Nebraska, the State Department determined that it needed to examine alternative pipeline routes that would avoid the environmentally sensitive Sand Hills region of Nebraska, a sand dune formation with highly porous soil and shallow groundwater that recharges the Ogallala aquifer."Library of Congress. Congressional Research ServiceParfomak, Paul W.; Pirog, Robert L.; Luther, Linda G.2012-11-05
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Natural Gas in the U.S. Economy: Opportunities for Growth [November 6, 2012]"Due to the growth in natural gas production, primarily from shale gas, the United States is benefitting from some of the lowest prices for natural gas in the world and faces the question of how to best use this resource. Different segments of the U.S. economy have different perspectives on the role natural gas can play. Suppliers, which have become the victims of their own production success, are facing low prices that are forecast to remain low. Some companies that have traditionally produced only natural gas have even turned their attention to oil in order to improve their financial situation. Smaller companies are having a difficult time continuing operations and larger companies, including international companies, have bought into many shale gas assets. Prices have remained low even as consumption has increased, in part, because producers have raised production to meet the demand and because companies have improved efficiency and extraction techniques. Some companies, many with large production operations, have applied for permits to export natural gas. This has raised concerns from consumers of natural gas that domestic prices will rise. The debate regarding exports is ongoing. [...] Over the next five years, many of the issues being debated now may be decided. The industry and market are adapting to the newly found supplies and the concerns associated with them, as well as integrating more natural gas into the economy. There are many evolving issues some of which Congress can influence directly because of statutes and some indirectly. On the demand side, legislation has been introduced regarding exports of liquefied natural gas and alternative fuels for vehicles. There has been other legislation related to environmental regulations of natural gas."Library of Congress. Congressional Research ServicePirog, Robert L.; Ratner, Michael2012-11-06
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Keystone XL Pipeline Project: Key Issues [January 24, 2013]"In May 2012, Canadian pipeline company TransCanada reapplied to the U.S. Department of State for a Presidential Permit to build the Keystone XL pipeline. The pipeline would transport crude oil from the oil sands region of Alberta, Canada, to the existing Keystone Pipeline System in Nebraska. It also could accept U.S. crude from the Bakken oil fields in Montana and North Dakota. A second segment of the Keystone XL pipeline system, the Gulf Coast Project, is proceeding separately to connect existing pipeline facilities in Oklahoma to refineries in Texas. When completed, the entire Keystone XL pipeline system would ultimately have capacity to transport 830,000 barrels of crude oil per day to U.S. market hubs. TransCanada submitted the May 2012 permit application after its 2008 Keystone XL permit application was denied. The State Department has jurisdiction over the Keystone XL pipeline's approval because it would cross the U.S. border. Before it can approve such a permit, the department must determine that the project is in the 'national interest,' accounting for potential effects on the environment, economy, energy security, and foreign policy, among other factors. Environmental impacts are considered under the National Environmental Policy Act, as documented in an Environmental Impact Statement (EIS). For the 2008 permit application, a final EIS was issued in August 2011, followed by a public review period. Largely in response to public comments and efforts by the state of Nebraska, the State Department determined that it needed to examine alternative pipeline routes that would avoid the environmentally sensitive Sand Hills region of Nebraska, a sand dune formation with highly porous soil and shallow groundwater that recharges the Ogallala aquifer."Library of Congress. Congressional Research ServiceParfomak, Paul W.; Pirog, Robert L.; Luther, Linda G. . . .2013-01-24
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Financial Performance of the Major Oil Companies, 2007-2011 [February 17, 2012]"Periods of high oil prices are usually associated with reduced economic growth, a deteriorating foreign trade balance, and rising prices. High gasoline prices, the most tangible result of high oil prices for consumers, reduce discretionary family income and influence decisions with respect to automobile choice and use. However, for companies involved in the oil industry, high oil prices generally result in expanding revenues and cash flow, and in some cases, record profit levels. While the oil industry is composed of hundreds of firms of various sizes doing business in different aspects of the oil supply chain, many characterize the industry through the performance of the five major integrated oil companies: ExxonMobil, Chevron, BP plc, Royal Dutch Shell plc, and ConocoPhillips. These companies are involved in all aspects of the oil supply chain from exploration and production through transportation, refining, and retail marketing, both in the United States and globally. They are also very large relative to the rest of the industry, and large even when compared to the economy as a whole; in 2011 their revenues were equivalent to over 10% of U.S. gross domestic product. This report examines the financial performance of the five major oil companies for the period 2007-2011. Both the sources and uses of revenue and profit are analyzed. The recent behavior of oil prices and company profits have led to changes in the structure of the market for oil in the United States which could have implications for gasoline prices and availability, and energy security. These issues are also analyzed in this report."Library of Congress. Congressional Research ServicePirog, Robert L.2012-02-17
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Rising Gasoline Prices 2012 [March 1, 2012]"Average national gasoline prices have increased by $0.46 to $3.78 per gallon between the end of December 2011 and the end of February 2012. This is $0.20 higher than the 2011 average annual gasoline price of $3.58 per gallon. In the first half of 2011, unrest in the Middle East and North Africa contributed to higher crude oil prices, which pushed gasoline prices higher. In early 2012, tensions with Iran are contributing to rising crude prices, which again are pushing up the price of gasoline. […] Many of the policies that may address rising gasoline prices are long term. Investments that produce or consume oil, such as new oil fields, pipelines, cars, or factories, are capital intensive and long term in nature. There are limited short-term options available to policy makers to address gasoline price increases. This report briefly covers several short-term options that have been considered by policy makers: strategic petroleum reserve release; gasoline tax holiday; relaxing fuel specifications; restricting refined products exports; limiting financial speculation; diplomatic measures. It is unclear what the price impact of these short term options would be, and they involve various policy trade offs. Potential costs may include national security, fiscal, and public health priorities. An additional set of option focuses on longer-term measures that may prevent negative impacts if gasoline prices rise in the future. Policy makers may choose to focus on measures that encourage efficiency, oil production, and alternative fuels. Pursuit of long-term measures in the absence of short-term measures, to the degree short-term measures may (or may not) be effective, may make it more likely that consumers will suffer from high gasoline prices for the time being. However, higher prices may also provide additional market based-incentive for investments by consumers and firms in efficiency, energy production, and alternative fuels."Library of Congress. Congressional Research ServiceNerurkar, Neelesh; Pirog, Robert L.2012-03-01
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U.S. Offshore Oil and Gas Resources: Prospects and Processes [February 10, 2012]"Access to potential oil and gas resources under the U.S. Outer Continental Shelf (OCS) continues to be controversial. Moratoria on leasing and development in certain areas were largely eliminated in 2008 and 2009, although a few areas remain legislatively off limits to leasing. The 112th Congress may be unlikely to reinstate broad leasing moratoria, but some Members have expressed interest in protecting areas (e.g., the Georges Bank or Northern California) or establishing protective coastal buffers. Pressure to expand oil and gas supplies and protect coastal environments and communities will likely lead Congress and the Administration to consider carefully which areas to keep open to leasing and which to protect from development. The oil spill that occurred on April 20, 2010, in the Gulf of Mexico brought increased attention to offshore drilling risks. Consideration of offshore development for any purpose has raised concerns over the protection of the marine and coastal environment. […] On December 14, 2011, the Obama Administration held lease sale 218 in the Western Gulf of Mexico, the first sale since the oil spill. A combined lease sale in the Central Gulf of Mexico (sale 216 and 222) is scheduled for June 20, 2012, the final sale of the 2007-2012 leasing program. […] The ultimate impact of oil and gas development in offshore areas will depend on oil and gas prices, volumes of resources actually discovered, infrastructure development, and restrictions placed on development, all of which currently carry significant uncertainties."Library of Congress. Congressional Research ServicePirog, Robert L.; Humphries, Marc2012-02-10
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Oil and Natural Gas Industry Tax Issues in the FY2012 Budget Proposal [March 2, 2012]"The Obama Administration, in the FY2013 [Fiscal Year] budget proposal, seeks to eliminate certain tax expenditures that benefit the oil and natural gas industries. Supporters of these tax provisions see them as comparable to those affecting other industries and supporting the production of domestic oil and natural gas resources. Opponents of the provisions see these tax expenditures as subsidies to a profitable industry the government can ill afford, and impediments to the development of clean energy alternatives. The FY2013 budget proposal outlines a set of proposals, framed as the termination of tax preferences, that would potentially increase the taxes paid by the oil and natural gas industries, especially those of the independent producers. These proposals include repeal of the enhanced oil recovery and marginal well tax credits, repeal of the current expensing of intangible drilling costs provision, repeal of the deduction for tertiary injectants, repeal of the passive loss exception for working interests in oil and natural gas properties, elimination of the manufacturing tax deduction for oil and natural gas companies, increasing the amortization period for certain exploration expenses, and repeal of the percentage depletion allowance for independent oil and natural gas producers. In addition, a variety of increased inspection fees and other charges that would generate more revenue for the Department of the Interior (DOI) are included in the budget proposal. The Administration estimates that the tax changes outlined in the budget proposal would provide $22.133 billion in revenues over the period FY2013 to FY2017, and $38.56 billion from FY2013 to FY2022. These changes, if enacted by Congress, also would reduce the tax advantage of independent oil and natural gas companies over the major oil companies. They would also raise the cost of exploration and production, with the possible result of higher consumer prices and more slowly increasing domestic production."Library of Congress. Congressional Research ServicePirog, Robert L.2012-03-02
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U.S. Offshore Oil and Gas Resources: Prospects and Processes [June 30, 2011]"Access to potential oil and gas resources under the U.S. Outer Continental Shelf (OCS) continues to be controversial. Moratoria on leasing and development in certain areas were largely eliminated in 2008 and 2009, although a few areas remain legislatively off limits to leasing. The 112th Congress may be unlikely to reinstate broad leasing moratoria, but some Members have expressed interest in protecting areas (e.g., the Georges Bank or Northern California) or establishing protective coastal buffers. Pressure to expand oil and gas supplies and protect coastal environments and communities will likely lead Congress and the Administration to consider carefully which areas to keep open to leasing and which to protect from development. The oil spill that occurred on April 20, 2010, in the Gulf of Mexico brought increased attention to offshore drilling risks. Consideration of offshore development for any purpose has raised concerns over the protection of the marine and coastal environment. In addition to the oil spill, historical events associated with offshore oil production, such as the large oil spill off the coast of Santa Barbara, CA, in 1969, cause both opponents and proponents of offshore development to consider the risks and to weigh those risks against the economic and social benefits of the development. […] The ultimate impact of oil and gas development in offshore areas will depend on oil and gas prices, volumes of resources actually discovered, infrastructure development, and restrictions placed on development, all of which currently carry significant uncertainties."Library of Congress. Congressional Research ServiceHumphries, Marc; Pirog, Robert L.; Whitney, Gene2011-06-30
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Petroleum Refining: Economic Performance and Challenges for the Future [Updated March 23, 2007]"The petroleum refining industry provides products that are critical to the functioning of the economy. Virtually all transportation, land, sea, and air, is fueled by products that are refined from crude oil. Industrial, residential, and commercial activities, as well as electricity generation, use petroleum-based products. Along with volatile changes in crude oil prices, the industry has faced evolving health, safety, and environmental requirements which have changed and multiplied product specifications and required capital investment in refineries. Since the late 1990s, the industry has undergone significant structural change which might alter its profitability requirements, its ability to provide stable product volumes to the consuming market, and its ability to adapt to current and future environmental requirements. […] To the extent that continued capacity expansion and technological investments are reduced, or not undertaken, because of low historical rates of return, even though recent returns are higher, U.S. dependence on imported refined products might increase, or product markets could be disrupted by shortages and price spikes. As the 110th Congress considers energy legislation, it is likely to be concerned with domestic energy security and market stability, issues linked to the performance of the petroleum refining industry. Increased imports of refined products, particularly motor gasoline, combined with growing imports of crude oil, could make the United States increasingly vulnerable to shocks originating in the world oil market. Importing motor gasoline into the United States in appropriate volumes may become increasingly difficult because of the unavailability of world supplies consistent with U.S. fuel specification requirements."Library of Congress. Congressional Research ServicePirog, Robert L.2007-03-23
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Natural Gas Markets in 2006 [Updated December 12, 2006]"The Energy Information Administration (EIA) in its Short Term Energy and Winter Fuels Outlook (STEWFO) provided good news for residential natural gas consumers. EIA projected that natural gas winter home heating costs might decline by as much as 13% from last year's record-setting levels, even though consumption is expected to increase this winter. The STEWFO sees prices for natural gas lower than last year as a result of weak market fundamentals. Analyses of natural gas market demand and supply conditions seem to be consistent with the EIA STEWFO. The price of natural gas is actually many prices. Small, residential, consumers typically pay the highest prices per unit of natural gas, and large industrial and electric power consumers pay the lowest prices per unit. Taken in this context, the 2006 price outlook may be less favorable than the EIA suggests, across different sectors. Risk factors, including weather conditions, movements in the price of crude oil, and developments in the futures markets all could affect the market balance in the natural gas market. Because these factors have caused price volatility in the past, the EIA outlook may best be considered as conditional on outcomes in these areas."Library of Congress. Congressional Research ServicePirog, Robert L.2006-12-12
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Oil Industry Profit Review 2005 [April 18, 2006]"The increase in world oil prices that began in 2004 and continued into 2005 led to increasing revenues and net incomes for all sectors of the oil industry. In 2004 and continuing into 2005, increasing world demand, led by China, India, and the United States, created a tight market in both oil production and refining, at a time where spare capacity was already at historically low levels. In addition, in 2004 and 2005, world political events including the war in Iraq, political unrest in Nigeria, and the political climate in Venezuela, among others, contributed to a market psychology that pushed up prices. In the U.S. domestic market, the effects of hurricanes Katrina and Rita continue to be felt both in oil production and oil refining. The hurricanes also contributed to the profitability of the oil industry in the U.S. market. However, while profits were high, the oil market demonstrated its ability to supply consumers as feared shortages associated with the hurricanes were very limited. […] Independent refiners and marketers earned a 92% profit increase in 2005 compared to 2004. Valero, the largest firm in this group and the largest refiner in the United States, led the way with a 99% increase in profit and earned almost two thirds of the profit of the group as a whole. High levels of profit, coupled with declining growth rates for profit, appear likely to continue in 2006. The potential volatility of the world oil market leaves any forecast for the industry uncertain. This report will not be updated."Library of Congress. Congressional Research ServicePirog, Robert L.2006-04-18
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Petroleum Refining: Economic Performance and Challenges for the Future [June 3, 2008]"The petroleum refining industry provides products that are critical to the functioning of the economy. Virtually all transportation, land, sea, and air, is fueled by products that are refined from crude oil. Industrial, residential, and commercial activities, as well as electricity generation, use petroleum-based products. Along with volatile changes in crude oil prices, the industry has faced evolving health, safety, and environmental requirements which have changed and multiplied product specifications and required capital investment in refineries. […] Regulatory compliance to meet congressionally mandated environmental standards, both on refined products and refinery sites, requires substantial capital investment by refiners, and has resulted in reduced profitability, according to the Energy Information Administration (EIA). To the extent that continued capacity expansion and technological investments are reduced, or not undertaken, because of low historical rates of return (even though recent returns are higher) U.S. dependence on imported refined products might increase, or product markets could be disrupted by shortages and price spikes. As the 110th Congress considers energy legislation, it is likely to be concerned with domestic energy security and market stability, issues linked to the performance of the petroleum refining industry. Increased imports of refined products, particularly motor gasoline, combined with growing imports of crude oil, could make the United States increasingly vulnerable to shocks originating in the world oil market. Importing motor gasoline into the United States in appropriate volumes may become increasingly difficult because of the unavailability of world supplies consistent with U.S. fuel specification requirements. This report will be updated."Library of Congress. Congressional Research ServicePirog, Robert L.2008-06-03
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Role of National Oil Companies in the International Oil Market [August 21, 2007]"In the United States, the term 'big oil companies' is likely to be taken to mean the major private international oil companies, largely based in Europe or America. However, while some of those companies are indeed among the largest in the world, by many important measures, a majority of the largest oil companies are state-owned, national oil companies. By conventional definitions, national oil companies hold the majority of petroleum reserves and produce the majority of the world's supply of crude oil. Since national oil companies generally hold exclusive rights to exploration and development of petroleum resources within the home country, they also can decide on the degree to which they require participation by private companies in those activities. […] However, if the price of oil moderates, the potential supply constraint related to the inefficient operations of the national oil companies may be a destabilizing factor in the world oil market. A wide variety of policy directions can be taken to mitigate the potential challenge posed by the dominance of national oil companies. Demand management policy can reduce the U.S. dependence on imports. The U.S. government can use its political influence to try to encourage nations not to use national oil companies to forward the aims of the government, but to follow commercial practices to maximize revenue flows. An expanded supply of oil could be encouraged as a condition for trade and aid agreements in some cases. Finally, promoting international trade and recognized commercial practices could be encouraged."Library of Congress. Congressional Research ServicePirog, Robert L.2007-08-21
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Alaska Natural Gas Pipelines: Interaction of the Natural Gas and Steel Markets [November 2, 2006]"In 1976 Congress approved legislation to establish the regulatory framework for building a pipeline to bring natural gas from the Alaska North Slope to the lower 48 states (Alaska Natural Gas Transportation Act, 15 U.S.C. § 719 et seq.). Despite the rich deposits of natural gas and the success of the Alaska oil pipeline, the Alaska segment of a gas pipeline has never been started. To encourage its development, Congress passed in 2004 and the President signed into law the Alaska Natural Gas Pipeline Act (Division C of P.L. 108-324), which includes a federal loan guarantee of as much as $18 billion. Since then, the North Slope producers and the state of Alaska have been in extensive negotiations on building a gas pipeline. Under a provision of the 2004 law, as no application for a certificate of public convenience and necessity for the pipeline had been received 18 months after passage of the law, the Department of Energy on April 13, 2006, began a study on alternative approaches to the construction and operation of an Alaska natural gas transportation system. […] The American Iron and Steel Institute (AISI) estimates that 3 to 5 million tons of steel could be required, but states that sufficient capacity can be readily developed in North America for manufacturing the necessary steel pipe. P.L. 108-324 contains a 'sense of Congress' resolution that North American steel should be used in the project. ExxonMobil Corporation, one of the three developers of Alaska North Slope oil and gas, has, however, announced an agreement with two Japanese companies to commercialize a new type of highstrength steel that could reduce Alaska pipeline costs."Library of Congress. Congressional Research ServiceCooney, Stephen; Pirog, Robert L.2006-11-02
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Winter Fuels Outlook 2010-2011 [October 29, 2010]"The Energy Information Administration (EIA) in its Short-Term Energy and Winter Fuels Outlook (STEWFO) for the 2010-2011 winter heating season projects that American consumers should expect to see heating expenditures rise by 2.5% on average compared to last winter. Average expenditures for those heating with natural gas are projected to see an increase of 3.6%, while those heating with electricity are projected to see a decline in expenditures of 1.9%. These two fuels account for the heating for approximately 88% of all U.S. households. Propane and home heating oil consumers are projected to see cost increases of 7.5% and 11.5%, respectively. Within the U.S. average projections, differences exist with respect to region of the country and type of fuel. Economic conditions of slow growth and high unemployment suggest that lower consumption of all fuels is likely, especially in the context of milder winter weather conditions that have been forecast by the National Oceanic and Atmospheric Administration (NOAA). The price of oil has been increasing in the months leading up to the 2010-2011 winter heating season. If the price of oil continues to increase beyond the projected level of $85 per barrel, heating costs might be expected to rise above projected levels for all consumers."Library of Congress. Congressional Research ServicePirog, Robert L.2010-10-29
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Keystone XL Pipeline Project: Key Issues [May 7, 2013]"TransCanada's proposed Keystone XL Pipeline would transport oil sands crude from Canada and shale oil produced in North Dakota and Montana to a market hub in Nebraska for further delivery to Gulf Coast refineries. The pipeline would consist of 875 miles of 36-inch pipe with the capacity to transport 830,000 barrels per day. Because it would cross the Canadian-U.S. border, construction of Keystone XL requires a Presidential Permit from the State Department. A decision to issue or deny a Presidential Permit is based on a determination that a project would serve the national interest, considering potential impacts on the environment, the economy, energy security, foreign policy, and other factors. Environmental impacts are evaluated and documented in an Environmental Impact Statement (EIS) under the National Environmental Policy Act (NEPA). TransCanada originally applied for a Presidential Permit for the Keystone XL Pipeline in 2008. The initial proposal included a southern segment from Oklahoma to the Gulf Coast. After a final EIS for the original project was released in August 2011, the State Department began a 90-day public review period to make its national interest determination. A key issue that arose during this review was concern over environmental impacts in the Sand Hills region of Nebraska. This concern led the Nebraska legislature to enact new state pipeline siting requirements that would alter the pipeline route through Nebraska. In January 2012, the State Department concluded that it would not have sufficient information to evaluate an altered pipeline route before a deadline imposed by Congress and denied the permit. The southern segment of the original Keystone XL proposal, now called the Gulf Coast Project, was subsequently separated from the original proposal because it did not require a Presidential Permit. It has been approved by the relevant states and is currently under construction."Library of Congress. Congressional Research ServiceParfomak, Paul W.; Pirog, Robert L.; Luther, Linda G. . . .2013-05-07
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Role of Federal Gasoline Excise Taxes in Public Policy [September 11, 2009]"American drivers, compared to those in other industrialized nations in Europe, pay relatively low federal, state, and local gasoline and diesel excise taxes. The Federal taxes are used specifically to fund annual highway construction, maintenance, and mass transit. Over the years, proposals have come forth to raise the federal tax as a way to address long-standing national policy concerns, including U.S. dependence on imported oil and various environmental problems related to large volumes of gasoline consumption. Policy attention on the role of the gasoline tax has also increased recently due to three major developments. First, the 2008 oil and gasoline price run-up and subsequent economic downturn have led to a decline in gasoline tax revenues available for needed highway construction and maintenance. Second, the possibility of enacting some form of binding climate change legislation in the next several years will eventually mean an increase in the relative price of fossil fuels, including oil and gasoline. Third, the volatility of gasoline prices has affected investment planning (e.g. for alternative fuels) and arguably contributed to the troubles facing domestic automobile manufacturers. In the above context, this report outlines some of the macroeconomic and microeconomic pros and cons of using the federal gasoline excise tax for policy purposes in addition to the funding of highway infrastructure."Library of Congress. Congressional Research ServicePirog, Robert L.2009-09-11
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Gasoline and Oil Prices [August 20, 2008]"During the summer of 2008, American consumers faced gasoline prices that attained record high levels of over $4.00 per gallon, and oil prices of over $140 per barrel. These high prices have contributed to a downturn in economic growth, and an increase in inflation. They have forced consumers to make difficult choices concerning spending patterns, while their general economic well-being declined. The record prices have raised costs and adversely affected a wide variety of industries, including transportation, automobiles, and agriculture. Because there does not seem to be one, easily identifiable, factor that has caused these high prices, and because prices rose so quickly from mid-2007 to mid-2008, consensus on how to mitigate the situation through policy has been lacking. Calls for increased exploration and drilling in Alaska and currently restricted offshore areas, energy conservation, increased reliance on alternative energy sources, curbing speculation on oil futures markets, releasing oil from the Strategic Petroleum Reserve, suspending the federal tax on gasoline, and taxing the profits of oil companies have all been debated. This report examines the extent of price increases in gasoline and oil, focuses on the linkage between the two, and analyzes the causes of the price increases, and the likelihood that they might be reversed through market responses, or policy measures."Library of Congress. Congressional Research ServicePirog, Robert L.2008-08-20