March 17, 2008

Oil Industry Begins Public Relations Campaign

By Darst, Paul

CHARLESTON - With gas prices consistently exceeding $3 per gallon, concerns about the environment and energy security worries, petroleum producer's have been on the defensive in recent years.

Now an organization that represents the industry has launched a program aimed at clearing up misconceptions about the industry.

"There are a lot of stereotypes about our industry," said Denise McCourt of the American Petroleum Institute. "We blame ourselves. We haven't done the job we've needed to do."

The API is a national trade association that represents oil and natural gas producers. The organization plans to visit the state Capitol March 4 with a traveling, interactive display that is designed to answer questions about the oil and natural gas industries, she said.

" 'I didn't know that,' is the most common thing I hear," McCourt said. "We try to help people better understand our industries."

Fuel Prices

Explaining why fuel prices have risen so much during the past couple of years is no easy task, but McCourt said it is what API officials try to do.

"The price we pay for crude oil has increased 60 percent the last few years," she said. "Market forces have forced prices up."

Tremendous rates of industrialization in India and China have strained the world's oil supply, McCourt said. Those countries now need oil and refined fuel to drive their increasingly industrialized economies, but the supply of those products has remained relatively flat. That has forced prices higher, she said.

"As U.S. citizens, it's a good thing - we want the Third World to continue to grow. The down side is that we see global demand (for oil) going up."

Record Earnings

Another difficult aspect of the industry to explain is the record profits recently reported by some oil companies. ExxonMobile Corp., for example, reported $40.6 billion in profits for 2007. But that's only part of the story.

"There is a misconception about the oil and natural gas industries making enormous earnings," McCourt said. "ExxonMobile is the largest company. When you look at what they earn on every dollar of sales, their earnings are not that extraordinary. It's less than 10 cents on every dollar of sales."

That is because most oil companies invest heavily in research and development, she said. Although they make lots of money, they spend lots as well. And much of that money is invested in sectors one might not expect.

"If you talk about what they are doing with their earnings, they reinvest them," she said. "They put them into looking for new resources. We want to be the fuel providers of the future."

Numerous industries make more per dollar of investment than oil companies, including tobacco and food product companies and pharmaceutical companies, McCourt said. Oil companies that only refine crude oil, such as Sunoco Inc., are far down that list. The oil companies that perform best are those that also search and drill for oil.

Another surprise, McCourt said, is who benefits from the industry's high earnings. About 41 percent of oil company stock is owned by 401(k) retirement plans and mutual funds, she said.

Technical Industries

During the March 4 display at the Capitol, visitors will be able to use three-dimensional displays to do things like position a drilling ship in the Gulf of Mexico, McCourt said. The exhibit will demonstrate the highly technical nature of the oil and gas industries.

That technology makes it possible to drill in places where it wasn't possible to drill in the past, she said.

"We can drill in the Gulf of Mexico in 10,000 feet of water," McCourt said. "The technology has allowed us to do incredible things. I think were on the fore-front of applying (technology) to finding more resources."

Those advances have made it possible to drill for natural gas in the rugged terrain of West Virginia, she said. And technology is helping make the industries more environmentally friendly. Horizontal drilling is one example. With one drilling rig and one vertical shaft, oil and gas companies now can ex-tract product from a large area without disturbing the environment as much as in the past.

Changes on the Horizon

The oil and gas industries recognize that changes are on the way, McCourt said. Alternative fuels are an increasingly important segment of our energy supply. But it will take time to change the oil-based infrastructure that took more than a century to build.

For example, ethanol is a common additive to gasoline today. But because it is corrosive, it cannot be transported through existing fuel pipelines, she said.

For the foreseeable future, oil and gas will be an important source of energy for the country. And the industry is taking steps to ensure that fuel is available. An oil refinery in Port Arthur, Texas, is in the process of doubling its capacity, McCourt said. Other refineries also are expanding. No new refineries have been built in the U.S. since 1975. she said.