Clairborne Deming, president and CEO of Murphy Oil Corp., recently told the U.S. House government reform committee that the Kyoto Protocol would be "devastating" for his firm.
Murphy, of El Dorado, Ark., is an integrated oil company producing 110,000 boed of hydrocarbons-65% oil and 35% gas. It operates two refineries in the U.S. and has a 30% interest in a refinery in Wales.
Deming said that an emissions trading system would cost Murphy $25-225/ton of carbon equivalent. He said that, assuming a base case of $125/ton, the cost in oil-equivalent terms would be $15/bbl.
"Besides the obvious, and intended, impact of more than doubling the price of our commodity to the consumer-in itself crippling-the trading system imposes an additional cost to refining crude oil into products.
"Approximately 1/15th of every barrel in the refining process is consumed as a refinery fuel. If the price of crude is arbitrarily increased by $15/bbl, this will add almost $1/bbl to our manufacturing costs.
"Last year, Murphy's cost (excluding crude costs) to manufacture crude oil into products was around $3/bbl. This trading system therefore will effectively raise our direct manufacturing cost by approximately 33%."
Deming noted that Murphy has survived since 1907 despite large oil price swings and government price regulation.
"We are adaptable and hold our own against the largest companies on the face of the earth. This threat is different. The major oil companies, because of sheer size and geographical diversity, will make it.
"You will cause smaller players, like Murphy, needed to maintain a level, competitive, dynamic, interesting energy field, to go out of business-all because of a problem, that if it exists, cannot possibly be solved by this clumsy, heavy-handed treaty."
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