In this section Mr. Liveris and I discuss US energy policy (or lack thereof) and
Todd:
US energy policy. I had several questions planned here but you have been all over TV the last week and a half answering them for me..
Andrew:
(Laughing) And I am not done yet, I am determined to shake this all loose because we are just shooting ourselves in the foot very effectively as a nation.
Todd:
There was an “American Energy Production Act” Senate Republicans just introduced recently, have you seen it?
Andrew:
The drilling one right?
Todd:
Yes, they said it would produce an estimated 24 billion barrels of oil a day and 47 trillion cubic feet of nat. gas.
Andrew:
Certainly the bill recognizes the problem. It is a Republican bill and certainly I appreciate Senator Domenici’s work on it. However, the country need a bill both Democrats and Republican can support
I was in Washington yesterday and I had meeting after meeting. I actually think I might get deported here eventually [laughter] . You know I’m just screaming from the rooftops to get real with our energy policy.
Todd:
Let’s say you left Washington and they said “this guy is right, let’s do everything he said we should”. Even if they did that and they started at the earliest next spring, after the election, what kind of lag based on your experience is it 2 years, 5 years before anything they do now actually takes hold and excess production comes online.
Andrew:
Well we went through this in 2005 with the Lease Sale 181 in the inter-continental shelf of the US. The US gulf we were told that time and I think this is still very true that there are some known fields of oil and gas that can easily be tapped into current infrastructure especially on the US gulf they could be on the street in 12-18 months. Not as big as the numbers you just quoted, because on the outer edge that would be Anwar and that could be as far away at 4-5 years because of the pipeline.
We take a window and if you said “let’s go now” I think the earliest is 18 months and the latest is five years. But something else happens which is very important. The world as speculators look at supply very differently. We have a real supply issue because demand is surging and everyone thinks that there is not enough supply. Supply is bottle-necked in two places. One is availability of actual oil and gas of course in our Country we’re not accessing it and it will take 18 months to five years to accomplish that. Overseas its ships and freight and there are not enough ships on the water to get all this oil to everyone to get all this gas to everyone. So that’s one bottleneck.
The second bottleneck is refining capacity which as you know this country won’t permit refineries. I think the only one under construction today is Valero’s (VLO) in Texas. No one wants a refinery in their back yard. So you have this ridiculous situation of Reliance building the world’s largest refinery in India and all the products are for exporting to the United States.
So those two bottlenecks will take several years, if you take those two bottlenecks out by passing laws, I think there will be an instantaneous reaction to price.
Part Three: Dow Ag
Disclosure (“none” means no position):Long Dow, None
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