The People of America's Oil and Natural Gas Indusry

Picking over Bones

Jane Van Ryan

Jane Van Ryan
Posted June 22, 2009

A new Ernst & Young report is adding some context to 2008's wildly fluctuating oil prices and misperceptions about oil company earnings. The report, called "U.S. E&P Benchmark Study," is the consulting firm's annual snapshot of the oil and natural gas industry's exploration and production activities.

The study shows, for example, that despite the fact that oil and natural gas industry revenues grew by 35 percent in 2008, the industry experienced an 8 percent decline in after-tax earnings due to higher costs. The study says the cost of producing energy has more than doubled since 2004.

Even with the rising costs, the industry continues to invest in finding more oil and natural gas, and this investment is reaping benefits for American consumers. Charles Swanson, Houston office managing partner for Ernst & Young told Platts Oilgram News, "Since 2004 [natural] gas reserves and production have grown at 56 percent and 29 percent, respectively." Clean-burning natural gas powers homes and industries and is the feedstock for chemicals used in everything from fertilizer to wind turbines that generate renewable energy.

The study also notes that oil reserves declined from 16.1 billion barrels in 2007 to 15 billion barrels in 2008. Perhaps oil reserves would climb if the oil industry was allowed to drill in oil-rich areas of the United States.

At present, oil companies are picking over bones--exploring leases offered by the federal government in areas that are reaching a high level of maturity and that might have dwindling prospects for resources. Congress and the administration should open more federal land in the United States both onshore and offshore to put America back to work producing its own energy.

Take action and tell your elected officials America needs increased access to its own energy resources.