Status woe: Kermit oil man a voice for change

www.oaoa.com Monday, March 17, 2003 By Julie Breaux Odessa American

John Bell said the Clinton administration and then-Texas Gov. George W. Bush nixed the idea of a differential tariff. Four years ago, he said the chairmen of Exxon Mobil and BP Amoco told him that crude oil would be priced at $12 to $14 through 2007, "and that I needed to sit down and shut up and go away. It was crazy."

At some point, everyone reaches his or her limit. John Bell reached his in 1998-99.

That’s when Venezuela flooded the market with crude oil, forcing some small, independent producers to shut in production. For Bell, a second-generation oil man from Kermit, the price of crude had fallen so low that any further production was unprofitable.

But, instead of grousing about the sad state of domestic oil and gas industry and accepting the status quo, Bell did something about it. And since that time, the soft-spoken Bell has been a consistent voice for regulatory and legislative change.

In January 1999, he organized an independent producers’ movement that climaxed when more than 300 producers demonstrated at the state Capitol to bring attention to the plight of Permian Basin oil producers then facing historically oil low prices.

He’s written scores of letters to top-level oil executives and to last few energy secretaries, sharing with them his concerns for the industry. He has also testified on the industry’s woes on Capitol Hill.

In early 2001, he applied for a position with the Department of Energy, hoping to influence debate on a national energy policy. At the time, though, Democrats controlled the Senate and his nomination never got out of committee.

Now, Bell wants to leverage his years of activism to obtain a seat in Congress.

Late last week, Bell said he was considering running for the open 19th Congressional District seat and would announce his decision sometime this week.

If he decides to run, Bell would have to hit the ground running. Since Rep. Larry Combest in January announced he would retire in May, about a dozen people from Odessa, Midland and Lubbock have announced their candidacies.

"I’m going to have to run like crazy."

Of the many issues he could focus on, the woeful status of the oil and gas industry would be his for the taking.

Bell has made it his mission to promote ways to stabilize energy prices, which, he says, would benefit producer and consumer alike.

"We’ve got to get off this (price) roller coaster," Bell said. "We need a long-term strategy to help us encourage stability instead of ‘Let’s spike it today and bust it tomorrow.’"

Out-of-control crude oil and natural gas prices typically spell trouble, too, he said, citing a 1997 Department of Energy study that found energy price spikes playing a significant role in nine of the 10 recessions since World War II.

"They (recessions) hurt the whole economy, and not just the United States but the world economy, because they send too many market shivers," Bell said. "All I used to think about were higher prices, but that’s not correct. I want a price that’s reasonable, that the public can afford and a price I can afford to produce it."

Energy-related recessions could be avoided and price stability achieved through a federal price floor, which would be tied to supply and demand, Bell said. A price floor would encourage domestic drilling, which in turn, would reduce the United States’ dependency on foreign imports.

Bell and petroleum engineer Kirk Edwards are kicking around the idea of promoting a nickel tax on diesel and jet fuel. The tax would, in essence, pay for a price minimum, he said.

"I don’t know that it’s acceptable in government or economic circles, but I think it would be beneficial to the country, and there’s lot of people in the industry who want that," Bell said.

If a price floor won’t fly, Bell believes a "floating" tariff on imported oil would help break the vicious circle of unrealistically high or low prices routinely leading to supply gluts or shortages. The tax would kick in when a barrel of crude dipped below a certain price, say $20, and increase the lower the price fell.

"There would be zero tariff at $20, and at $18 it would be $2 a barrel. At $10 a barrel, the tax would be $10," Bell said.

The government could reap billions of dollars from the import tax, Bell said, but few have indicated much support for the plan.

"Everybody from the (Department of Energy) on down said we couldn’t do that. It was just impossible."

In addition to floor prices and import tariffs, Bell believes a restructuring of the use of the Strategic Petroleum Reserve would be a "natural way" to moderate wide swings in crude oil prices.

The Strategic Petroleum Reserve is a U.S. government complex of four sites created in deep underground salt caverns along the Texas and Louisiana Gulf Coast that hold emergency supplies of crude oil.

"I think the SPR needs to be expanded and full so we have the reserve supply to help soften the economic impact to the country," Bell said.

Bell was critical of the way Bush has been filling the 700-million-barrel reserve with crude averaging slightly more than $27 a barrel.

"Supply and demand influence prices," Bell said. "So, if you have dropping (private) inventories, it’s telling you that supply is not keeping up with demand. Then quit buying it. When you see excess supplies available, you buy."

Bell said he felt vindicated by the release of a report by Senate Democrats two weeks ago that maintained Bush’s decision to divert 40 million barrels of crude from the market into the SPR helped drive up gasoline and other energy prices.

During 2002, when oil was diverted steadily into the reserve, oil prices climbed from the low $20s early in the year to over $30 a barrel by September. After easing a bit, prices soared again toward the end of the year, remaining above $30 a barrel from Dec. 23 through last Thursday, or 50 days straight.

Abraham has rejected the notion, but Bell doesn’t.

"We don’t need to buy $35 oil and put it in storage," Bell said. "It’s just plain, simple Economics 101. It isn’t rocket science. This is just smart, intelligent buying that will help soften what we’re doing even without some of these other ideas. Adding to the SPR in times of shortage is adding fuel to the fire. And somebody somewhere at pretty high levels is not picking that up."