Big Oil's Message - Please Join Us

John Felmy is Big Oil's Chief Economist. He can tell you everything you need to know about the history of our oil-based economy. But he didn't start out being their financial czar. He's a Pennsylvania boy who was born in Williamsport, went to high school in Jersey Shore and ended up going to Penn State University with just $20 in his pocket. His interest in oil and the Lehigh Valley began during summers spent working with a repair crew on the Tidewater Oil Pipeline, He learned something about both the economy and oil in those early years, and was in town recently to speak to the Lehigh Valley Tea Party. He spared some time for a bottom-feeding blogger, too. "I'll speak to anybody," he admitted.

One of the first things he pointed out is that the Tidewater Oil Pipeline, which extends from northwestern Pa. to Bayonne, N.J., was built to break J.D. Rockefeller's grip on the railroads. You see, King Cole and rail used to be the main mode of transportation.

These days, it's impossible to deny the impact the oil industry has on the economy. Nearly 10 million Americans are employed in the oil and gas industry, which accounts for nearly 8% of our gross domestic product. Moreover, Big Oil is actually owned mostly by you and me. Tens of millions of Americans have IRAs and pension funds that are heavily invested in oil and gas.

But haven't we peaked? Not so, states Felmy. He notes that, over the years, there has always been a fear that we will soon run out. In the 1870s, when oil was used primarily for kerosene, the first big scare occurred. This was repeated again in the 1900s, when the first cars began appearing on highways. It happened again in the 1970s, when the long lines at fuel pumps resulted from price controls on oil that had already been produced.

The likelihood of a real oil shortage anytime soon is remote. The reason for that is twofold - technology and markets.

"Technology has changed everything, especially in Pennsylvania," Felmy assures. He notes that we now have the ability to drill in deep water, more than two miles under surface. In addition, it is now economical to draw oil from the Canadian Oil Sands, which will result in 170 billion barrels. Finally, he points to advances in hydraulic fracturing and horizontal drilling that have made Pennsylvania the third largest producer of natural gas in the country.

Markets are better now, too,he claims. The market now dictates price. "If you don't allow the markets to set the price, that's when you run out of stuff because the price is set too low," he explains. He derided the windfall profit tax, which was finally repealed during the Reagan years. as a terrible idea that "decreased production, increased imports and destroyed jobs."

As an economist, he supports the PennEast pipeline, a proposed 110-mile long pipeline from Pennsylvania to New Jersey, going through parts of Northampton County. "Policy has to be robust, redundant and reliable," he argues."If you don't have enough natural gas where you use it, you lose opportunity. This gives people and business the benefit of a lower price."

Noting that Pennsylvania has one of the highest corporate income taxes in the country, he opposes a severance tax. "Before you move down this road, tell us we're not paying our fair share already." But he supports an impact fee as "something you clearly need. Communities are clearly impacted and should share in the revenue."

Felmy stressed that the notion that the oil industry receives tax subsidies as "sheer nonsense." He noted that, like any other business, they can deduct the cost of production.

The immediate problem facing Big Oil, states Felmy, is a lack of education. "In Washington, facts don't matter," he notes. "It's talking points," which leads to misconceptions. But there's an even bigger, long range problem. A lack of labor.

"People are retiring and we need to get people in and trained," he explained. There are good-paying jobs for welders, gauge readers and those who have acquired technical skills that are taught in our community colleges. It is possible for a person in his early 20s to make $100,000 per year in these jobs. And this has a ripple effect. In North Dakota, for example, where the oil industry is well-established, he saw a local McDonald's offering a $200 signing bonus because it is strapped for labor as a result of so many people working in the oil industry.

"Please join us," he concluded.