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John Felmy's remarks at press briefing teleconference on the winter energy economic outlook

As prepared for delivery

Press briefing teleconference on winter energy economic outlook
John Felmy, API chief economist
Thursday, November 21, 2013

Opening statement, as prepared for delivery:

Good afternoon everyone. Thanks for calling in. I want to talk to you today about gasoline prices as we kick off the Holiday driving season this weekend. Then I’ll discuss the winter energy outlook, including estimated energy costs for Americans over the coming year. And, most importantly, I want to discuss what policy changes we should consider to lower energy costs for American families. I’ll also provide simple tips consumers can use to lower gasoline and electric costs.

Gasoline prices are $3.22 a gallon today as we approach the Thanksgiving week, according to AAA. After falling for much of the summer and fall, prices have recently been pushed up by increases in world crude oil prices and rising U.S. demand.

However, the U.S. Energy Information Administration’s latest driving season forecast projects that gasoline and diesel prices will hold steady through at least the first half of 2014 (STEO, November 13, 2013).

U.S. refineries continue to produce record amounts of gasoline. In fact, API’s monthly petroleum statistics, being released today, show that refineries produced a record amount of gasoline and distillate year to date.

Now, turning to the coming winter, annual heating costs for natural gas users are estimated to be $665 in the coming year, according to EIA statistics. That’s up 11 percent from last year, but down 19 percent from the winter of 08-09. EIA data also shows that for families who use heating oil to heat their homes, annual costs are estimated to be $2,006 this winter. That’s down 4 percent from the prior year.

The recent surge in domestic energy production on state and private lands has helped put downward pressure on prices for petroleum products like gasoline and diesel, as well as natural gas. And increasing production here at home is possible thanks in large part to the shale energy revolution -- brought about by hydraulic fracturing and horizontal drilling -- which has increased our domestic oil and natural gas resources. We are already the world’s number one producer of natural gas, and the International Energy Agency believes that the United States will be producing more oil than Saudi Arabia just a few short years from now.

But production on federal lands – where the administration has control – has fallen dramatically in the last five years. With the right government policies that open up federal lands and waters for responsible development while speeding up the permitting process, we can do much more to help consumers. Increasing oil production could add supplies that could help put additional downward pressure on gasoline prices. More production also would reduce reliance on imported energy from less stable nations . . . And it would mean more jobs and more revenue to our government to help pay for education and hospitals.

We also have concerns that government regulations threaten to increase costs. One major concern for consumers is ever increasing biofuel mandates under the Renewable Fuel Standard. These mandates could drive up gasoline costs by 30 percent and the cost of diesel by 300 percent by 2015, according to a study by NERA. EPA’s recent proposal to trim next year’s mandate is a welcome stopgap, but ultimately Congress must repeal these ever increasing biofuels mandates to protect consumers in the long run.

Also, duplicative new federal regulations now being considered for natural gas could jeopardize the shale energy revolution. States are already regulating effectively; adding another layer of federal regulation is unnecessary and counterproductive.

There are also steps consumers can take to lower their energy costs.

Consumers can help trim demand – and help put downward pressure on prices – by using gasoline and electricity more efficiently.

One way to reduce demand is to consolidate car trips. By planning errands better and carpooling when possible, significant reductions in fuel use are possible.

Consumers also can save gasoline by ensuring vehicle engines are tuned and tires are properly inflated. Both can increase miles per gallon.

Also, those purchasing new vehicles might consider more fuel efficient models. Many conventional vehicles can now go 40 miles on a gallon of gas, and consumers can choose from an array of hybrid and electric vehicles and some powered by natural gas.

Motorists can also conserve by keeping speeds down. Lower speeds increase mileage and enhance safety.

Some easy tips for saving money on electric bills include turning off lights when leaving a room and shutting down and unplugging electronic devices when not in use.

Consumers can save in the long run by upgrading old appliances with energy efficient ones, installing insulated windows or upgrading insulation in the attic and exterior walls.

To conclude, the good news is that energy costs are for the most part down. But there are specific policy changes the administration and Congress should make to help put downward pressure on prices. There are also small changes consumers can make that will save them over the course of a year.

Thank you. And now I’d be happy to take your questions.