With Friends Like This…

Keith Reid

At the bottom of every press release issued by the American Petroleum Institute is the following statement: API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy.

That is technically true. And API has been useful at various times in supporting all of those facets. But the hard reality is that API’s representation drops off dramatically the further downstream you go past exploration and production. That is borne out by its aggressive support for the expansion of natural gas pipelines in the Northeast. In the Dateline section you can find a news item expressing dismay over New York’s rejection of the Constitution pipeline for environmental reasons, and another one supporting bipartisan legislation that would enhance the natural gas pipeline infrastructure. Not included is another release hot off the wires denouncing New York’s natural gas policy and a number of similar releases over the past year.

The stated goals that API supports with these expansions are to reduce electrical cost, though heating is referenced indirectly as well in some cases.. The electricity cost angle is natural enough—these pipelines will supply natural gas for electrical generation. However, it’s debatable just how essential pipeline expansion is for that purpose. But, it’s hard to see including heating in the mix as anything but an attack on the deliverable heating oil and propane industry. And, a public assault that is unnecessary even when pursuing more significant goals.

The needs of heating oil and propane marketers invariably pale next to the opportunities provided by the natural gas bonanza that is currently underway. And, more than likely, replacing those deliverable fuels with utility-supplied natural gas is an afterthought or “acceptable” collateral damage. The real push certainly encompasses electricity generation, but one would suspect the biggest driver is opening up natural gas export opportunities. And, if somebody else can be made to pay for that infrastructure, all the better.

This is nothing new. I can recall a particularly contentious time after Hurricane Katrina struck in August 2005, causing a major disruption in the supply infrastructure and leading to gasoline prices in the $3 range. Politicians, anxious to jump on the populist bandwagon, were quick to blame “price gouging” instead of the natural market forces that were readily apparent, but that required at least some basic amount of sophistication to understand.

In the midst of this, with a variety of punitive tax solutions and other “punishments” being discussed by various Congressman (and undoubtedly generating significant upstream fear), API came out with an op-ed in major national media outlets talking about how price gouging was unacceptable with language that left open the suggestion that retail price gouging might actually be a notable phenomenon. There was an immediate industry backlash and API corrected course.

The reality is that a marketer or dealer’s interests are best represented by the local and national associations focused on operations below the refinery level. It’s in your best interest to support these associations through membership, and going beyond membership. Maybe it’s time to ask them to work with API to see if there is any common ground (a big if) where they can represent all facets of the industry as they claim on this issue. Can they at least drop the line about heating prices from the pitch?

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