by Wil Levins
The President is right that domestic crude oil production is up in the United States because of the North Dakota oil finds, shale oil production in Texas, and other various on-land and off-shore drilling operations. And he is also correct that these domestic oils are being exported overseas. But, I know firsthand that this is actually a very bad sign for U.S. refining. U.S. refineries, when at full capacity, would have consumed all of this new domestic crude oil as we could not supply our own demands within the United States.
- The Devil is in the details -
The real "tale of the tape" is the volume of imported crude oil and why it is down. Domestic refining capacity is at a huge low because many refineries have shut down operations, thus imported crudes are not needed to feed these refineries. This has led to the unemployment of thousands of American refinery workers and thousands more of ancillary workers.
The more appropriate data to use in judging the value of the President's words, as pertains to government interaction with the Oil Industry, is found in how much imported gasoline, diesel fuels, and other finished petro products are coming into the U.S. from refineries overseas - specifically Asia. Those numbers are way up - climbing daily - and are a clear indication that American manufacturing in the oil industry is on a very rapid decline.
- The Real Impact -
Each domestic refinery job lost - by my rough estimate - carries with it $85 to $100 thousand or more in individual salaries, which means, that much less is now available to be spent within our own economy. Just looking at North East Refining over the last two years, I would estimate that between $300 to $400 Million annually have been removed from our Delaware Valley regional economy - and I may be estimating that number too low.
As much as we Republicans would like to lay all the blame on the President, we can't. These refinery decisions are made by oil companies. However, their decisions are made in response to the demands of stock holders, the costs of operating within U.S. market conditions, and complying with the regulatory blanket of our various local, state and national governments.
That said, I do not feel the President should crow about these developments because the impact of refinery closings on our economy will not recover quickly - if at all in some regions - and will probably become worse in the very near future.
- To be continued -