Economic Impact of the U.S. Oil Industry
Dean Foreman, Chief Economist, American Petroleum Institute (API), and Prentiss Searles, Petroleum Marketing Policy Manager, American Petroleum Institute (API) joined Grayson Brulte on The Road to Autonomy podcast to discuss the economic impact of the U.S. oil industry.
The conversation begins with Dean sharing an overview of the current state of the U.S. oil markets.
We have historically strong demand, potentially record demand this year and next combined. Weak drilling activity, weak investment. That opens the question of just the extent that the U.S. can participate in this recovery.
– Dean Foreman
The U.S. is no longer an exporter of oil, the U.S. is once again a net-importer of oil.
In 2020 [The United States] was a net-exporter of between $15 and $16 billion dollars. We have gone from imports of $300 to $400 billion dollars a year to exports of $15 to $16 billion and potentially is the U.S. energy revolution remains intact the ability to grow that.
– Dean Foreman
A recent report has stated that the United States could be heading for an oil shortage in 2022. Grayson asks Dean about this report and what the potential impact will be on the economy and the average consumer. Dean explains how this could lead to higher costs for transportation and the shipment of goods.
With a potential oil shortage, Grayson asks Prentiss what it will mean for U.S. consumers and their driving habits. Looking back in history, Prentiss discusses how U.S. drivers changed their driving habits to save money and why consumers may opt for hybrid vehicles if this scenario happens.
Hybrids definitely provide economic ways to achieve higher fuel economy.
– Dean Foreman
As society starts to shift to electric vehicles, Grayson asks Dean about the economics and the potential impact policy will have on cost increases for consumers.
By having an EV mandate built into the economy will impact the amount of vehicles that are available for the secondary market to purchase. That ends up having an additional cost and EVs are $10 to $15 thousand dollars more compared to an equal-sized vehicle.
– Prentiss Searles
Staying on the theme of policy, Grayson asks Dean about a Tampa, Florida Council Member who proposed banning fossil fuels and any new fossil fuel infrastructure in the city of Tampa by 2030. Dean who is originally from Tampa, explains what the negative impact would be on Florida’s economy.
This would be one way to really grid Florida’s economy to a halt.
– Dean Foreman
The natural gas and petroleum industry supports more than 10 million jobs in the United States. The average salary in the industry is $50,000 above the nationwide average.
Shifting the conversation back to passenger cars, Grayson asks Prentiss what would the current state of the electric vehicle market look like if there were no subsidies? Prentiss explains that there would still be a market for electric vehicles, but the market would not be as large as it is today. He cites Georgia as an example, when the electric vehicle tax credit was removed, EV sales plunged by 90% in the State.
Referencing an article in the Wall Street Journal about how automakers are trying to increase sales of electric vehicles by demanding higher taxes on conventional vehicles that burn gas and diesel fuel, Grayson asks Dean when do shareholders raise the economic concerns of this strategy.
The conversation flows into a discussion about free markets and when do market-based economics return instead of markets being driven by policy.
Consumers are ultimately going to be the ones who have to choose. Affordability is going to rule. We have to have an embedded faith that consumer preferences will ultimately speak and that this will play out.
– Dean Foreman
Looking at the passenger vehicle market, Prentiss shares his thoughts on free markets and consumer choice of vehicles. Consumers will end up choosing vehicles that meet their needs.
Regardless of how quickly EVs take off as a percentage of sales, in 20 years, the majority of vehicles are still going to remain internal combustion vehicle.
– Prentiss Searles
Expanding upon consumer choice, Prentiss discusses the best ways to reduce carbon emissions of vehicles without having a negative economic impact. As more electric vehicles come online with charging infrastructure, Dean discusses what the potential economic impact will be on the petroleum market.
Wrapping up the conversation, Dean and Prentiss discuss the future of the petroleum industry.
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Recorded on Thursday, April 22, 2021
