Independents Pessimistic About Crude Price Run-up
The recent rise in U.S. crude oil prices due to the announced
production cuts by the Organization of Petroleum Exporting
Countries (OPEC) shouldn't stop Congress from pursuing legislative
reforms for domestic oil and natural gas producers, the head of an
independent producer association said yesterday.
"Certainly some people look at that [price rise] and say 'well
your problem is solved because OPEC's going to announce reduction
cuts.' We support restraint from the suppliers of oil around the
world. The problem is that even after the announced cuts, the price
of oil is still at about $14 a barrel. That translates into prices
in the field from about $8 to $12 a barrel," said George Yates,
chairman of the Independent Petroleum Association of America
"When you see it at $17 or $18 and headed north, you know that
the oil industry can start getting back to work. The price [impact]
as a result of the OPEC announcement is still extremely low. OPEC
still does not seem to have any credibility in the market. And we
are not going to let that be used as an argument against major
legislative reform," he told reporters during a press conference on
Capitol Hill. The price of West Texas Intermediate crude has inched
above the $15 mark.
The briefing was held as part of IPAA's "Crude Awakening
Campaign," during which it presented lawmakers with a "Oil Price
Crisis Relief Resolution" signed by more than 50,000 producers
urging the White House and Congress to approve tax initiatives,
marginal well credits and other types of economic reforms to lift
oil and natural gas producers from their currently depressed state.
A number of Senate and House lawmakers - Senate Energy Committee
Chairman Frank Murkowski (R-AK), Sen. Pete Bingaman (D-NM), Reps.
Wes Watkins (R-OK), Kay Granger (R-TX) and Lamar Smith (R-TX), to
name a few - dropped by the briefing to show their support for
independent producers. "The oil industry...has lost almost 50,000
jobs since the price collapse began in November 1997. Why isn't the
White House supporting them and why isn't Congress passing tax
incentives and relief for the domestic oil and gas industry?" asked
Smith, who added it was long "overdue."
Independent producers and lawmakers called on the federal
government to offer price support to the oil and gas industry
similar to that which already has been extended to the domestic
steel and agriculture industries. IPAA's Yates emphasized that the
relief was being sought for both oil and gas. "This is not an oil
industry and separately a gas industry."
He noted the industry shrunk 15% last year in terms of jobs, and
that production was down 8% in one year, or 565,000 barrels/day.
"We're [being] called upon by the administration in the next
several years...to meet a tremendous growth in demand for natural
gas. That's going to be very difficult to do as that [production]
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