U.S. Must Lift Oil Production to Ease Prices, Graves Says

This story appears in the April 4 print edition of Transport Topics.

American Trucking Associations President Bill Graves said Congress and the Obama administration must take steps to increase oil production in the Gulf of Mexico, but that domestic oil production alone would not provide a solution to high diesel fuel prices that are hurting the trucking industry.

“We believe Congress should urge the Department of Interior to issue both shallow- and deep-water drilling permits in the Gulf,” Graves told the House Committee on Natural Resources on March 31. “We also believe Congress should direct the administration to include the Atlantic and eastern Gulf in the environmental impact study for the upcoming leasing program.”

The committee currently is examining Republican-sponsored legislation aimed at increasing domestic energy production.

Karen Harbert, CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, said the administration does not have a timetable to begin issuing permits at a “sufficient rate.”

“From its earliest days, the Obama administration has continually taken land off the table for oil production, most notably the Gulf of Mexico,” Harbert said. “The de facto moratorium that has been put in place to prevent new oil and natural gas exploration and production has put the country back on a declining production trend.”

In his testimony, Graves also said he agrees with President Obama that there is no single solution to high fuel prices.

“We are not going to be able to either simply conserve or drill our way out of this crisis,” Graves said. “We’re going to have to do both.”

Graves said he believes investor speculation in the oil markets is contributing to unstable fuel prices, and that there is a close correlation between diesel price increases and trucking company bankruptcies, especially for small motor carriers with fewer than five trucks.

Every penny increase in the price of diesel fuel costs the trucking industry an additional $356 million a year, he said.

“The bottom line is that, as a result of this dramatic increase in the price of diesel, we do expect an increasing number of trucking companies to fail,” Graves testified.

He also said trucking sees promise in liquefied natural gas. However, LNG currently is too expensive for motor carriers other than those that operate close to home in mostly urban areas.

“We are more than interested in transition to new sources of fuel, new sources of power, but it’s not something that’s like a light switch that just goes on and changes overnight,” Graves said. “In the meantime, we absolutely don’t have a fuel that will move 80,000 pounds over the Rocky Mountains other than diesel fuel. So our concern is not seeking cheap fuel; our concern is seeking some stability in the fuel available to us for the near term.”

Graves said that because LNG-powered trucks are significantly more expensive than traditional diesel-powered trucks, Congress needs to offer the industry a financial incentive such as a tax credit to encourage the purchase of alternatively powered vehicles.

“In addition, we would encourage you to incentivize the construction of standardized LNG refueling stations and provide a weight variance from the federal gross vehicle weight limits for trucks to accommodate the increase in weight associated with LNG technology,” he said.

But Graves said demand reduction also is a very important part of an effective comprehensive energy strategy.

To reduce demand, Graves said, ATA recommends a program that combines a national maximum speed limit of 65 mph, allows more productive trucks, invests in highway infrastructure to reduce congestion and supports research from new fuel-efficient truck technologies.

The United States also needs to fully develop the nation’s oil shale resources in Colorado, Utah and Wyoming and invest in coal-to-liquid and gas-to-liquid technologies to take advantage of vast domestic coal and natural gas resources, Graves told the committee.

“I come to this hearing not in search of 25-cent-a-gallon fuel; I come to this hearing in search of stability in the fuel markets and some guidance — or hope — that we’re starting a more pragmatic transition into what our future’s going to look like,” Graves said.

Among the other people speaking before the committee were Michael Fox, executive director of the Gasoline & Automotive Service Dealers of America Inc., and Don Shawcroft, president of the Colorado Farm Bureau.