NCPA - National Center for Policy Analysis


August 25, 2009

Proposed federal legislation aimed at curbing global warming would drastically reduce domestic fuel production, according to a new study commissioned by the American Petroleum Institute, the U.S. oil industry's main trade group.

Other major findings:

  • By 2030, U.S. refining production could drop 17 percent from today's levels if the climate bill is passed as currently proposed.
  • The drop would have to be made up by foreign imports, meaning the United States could end up relying on other countries for 19.4 percent of its refined fuel -- nearly twice the amount it imports today.

The report argues that restrictions on emissions will be a burden on U.S. refiners and also underscores the bleak prospects for refiners, who have had profits wiped out by slumping demand during the recession.

The industry sees the climate-change bill sponsored by U.S. Reps. Henry Waxman (D - Calif.) and Ed Markey (D - Mass.) as the harbinger of a grimmer future.  Proponents of the law say its costs would be minimal and that it would create millions of new jobs in renewable-energy industries and help steer the United States away from a dirty fuel source.

The Waxman-Markey bill, which the House narrowly passed in June would:

  • Put a price on greenhouse-gas emissions, such as carbon dioxide, that contribute to climate change.
  • Issue a fixed number of "allowances" for emissions, and companies would have to pay for emissions they generate beyond those allowances.
  • Require refiners to have permits for nearly half of U.S. carbon-dioxide emissions, though the industry would receive only about 2.25 percent of the total emissions allowances (the electricity-generating sector, also a major source of greenhouse gases, obtained a larger share of the allowances).

If the United States puts a price on carbon emissions, domestic production would decrease as U.S. refiners deal with higher costs and lower demand for fuel, the API-backed study concludes:

  • Average U.S. refinery output would drop to 12 million barrels a day in 2030 from about 14.5 million barrels a day currently, if nuclear power, technology to reduce carbon emissions and the use of international offsets fail to become widespread. Refinery utilization rates could drop to 63.4 percent, from about 83 percent today.
  • Without the restrictions of a Waxman-Markey bill, U.S. production rates would grow to an average 16.4 million barrels a day in 2030.

Source: Angel Gonzalez, "Oil Industry Details Costs of Climate Bill," Wall Street Journal, August 24, 2009.


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