Flowing Imports

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Flowing Imports

By Mitch Morrison - 10/07/2002
ORLANDO, Fla. -- Despite grandiose talk of energy independence, the United States will grow increasingly reliant on vast overseas supply, though alliances may shift somewhat from the Middle East to Russia, Canada and Mexico.

While increasing exports from roughly 50 percent to two-thirds over the next 15 years may draw consternation from strict nationalists, at the very least it dispels the age-old myth of a world without oil by the end of the 20th century, an oil official said yesterday at the National Association of Convenience Stores annual trade show and convention.

"We like to talk about energy independence," said Duane Gilliam, "but I don't think in my lifetime or in the lifetime of my children or grandchildren will we see this. I don't think that's a bad thing."

In a global tour of current and potential oil hotbeds, Gilliam, executive vice president of corporate affairs at Marathon Ashland, envisioned a future rich with supply and environmentally friendly fuel, but frequent price hiccups and pipeline disruptions.

Speaking Sunday before 150 attendees in a presentation entitled Petroleum Supply Outlook, Gilliam predicted world consumption would climb two percent annually, with developing countries accounting for a 2.8 percent spike and industrial nations by 1.5 percent. Indeed, "the major threat to supply is not geological, it's political," he said, alluding to the Kyoto agreement that the Bush administration vociferously opposed because of the proposal's aggressive push to reduce hydrocarbons in a manner that could seriously injure the U.S. economy.

During an hour-long address, Gilliam made the following observations:
* Imports: While Middle East countries will continue to play a significant role, expect Russia to possibly overtake them as America's top oil supplier. "We will see more Russian oil and, politically, our president and his administration want to see more Russian oil."

*North American Buildup: Western Canadian and Mexican oil production has skyrocketed, with both investing billions of dollars to upgrade pipelines to transport product to the U.S. at vastly cheaper prices than OPEC nations. "Pushing of Canadian crude oil with [cheaper] pricing, I think that bodes well for us in the future."

*Refining Costs: The move toward fuel efficiency, both in gasoline and distillates, is forcing the sale of scores of refineries across the country. Reformulated fuel, from lower-vapor to ethanol-based, along with the elimination of MTBE, will cost the petroleum industry $31 billion in investment costs and another $12.4 billion in incremental costs. "It's a lot of money to stay in business and to stay at the table," Gilliam said.

"In my 35 years [in the petroleum world] I have never seen so many refineries for sale. People do not believe they can make the capital investment necessary to meet new reformulated standards."