Realizing Our Energy Opportunity
Posted September 4, 2014
New Jersey Gov. Chris Christie is making headlines this week with a speech from Mexico calling for stronger economic ties between the two countries and actions to sustain what he called the “North American energy renaissance” – including lifting the decades-old ban on exporting U.S. crude oil. Christie:
“For all of North America, the energy revolution has improved our strategic and competitive position. But the revolution remains in its infancy. And whether North America realizes the full potential of its energy opportunity will be the result of more than just luck and natural bounty, it will also be driven by the policy choices and investments we must make. … The 1970s-era ban on crude exports creates a price anomaly which holds U.S. crude oil at a discounted price, which ultimately hurts upstream production and limits the energy boom.”
Christie’s remarks parallel what others are saying about ending the domestic crude oil export ban. Shell Chief Executive Officer Ben van Beurden at a Columbia University energy conference this week (via Reuters):
“Policymakers here in the United States should embrace a truly liberalized, diverse and global energy market. (U.S. oil and natural gas exports) would reinforce the long-term future of North American energy production (improve trade and) help to make the global energy system much more stable.”
U.S. Rep. Joe Barton of Texas (also Reuters):
“I’m in favor of overturning the ban on crude oil exports. The shale revolution has changed the energy landscape in our country. … It is time to change our laws to match this new reality.”
That reality is an energy revolution that’s driving U.S. oil production to levels not seen since the 1970s – again, when the U.S. oil export ban went into effect. The U.S. Energy Information Administration projects domestic production will reach 9.6 million barrels per day in 2019 – 3.1 million barrels more than in 2012 – and the International Energy Agency estimates the U.S. will lead the world in oil output by next year.
Together with surging natural gas production from shale and other tight-rock formations, using advanced hydraulic fracturing and horizontal drilling, America’s energy picture has changed dramatically since the oil export ban was imposed. Indeed, the U.S., already the world’s No. 1 producer of natural gas, could position itself to have significant, positive impacts on global energy markets if it would lift the crude export ban and expedite approvals for projects to export liquefied natural gas.
Even with trade barriers in place America is benefitting from some energy exports. The Commerce Department reports that in June exports of crude and petroleum products – mostly refined petroleum products because the U.S. exports only a small amount of crude in a few special circumstances – totaled $12.7 billion, up more than $1.2 billion over June 2013. Oil and natural gas exports accounted for 10 percent of June’s exports of goods by value. Without oil and natural gas exports, the overall trade deficit would be 17.2 percent higher.
Exporting domestic crude would add supply to the global oil market, help stabilize it, while also supporting U.S. foreign policy. It also would help stimulate increased domestic production and benefit consumers.
In the Dallas Federal Reserve’s July “Economic Letter,” senior research economist Michael D. Plante writes that production of oil from shale, which is mostly “light” crude, is growing faster than U.S. refiners can use it since most are configured to process heavier crudes. Plante:
Current forecasts call for more U.S. crude oil production growth, mostly involving the light variety. With U.S. refiners already operating at very high utilization rates and imported oil rapidly being crowded out, the supply glut first seen in the middle of the U.S. is moving to the Gulf Coast. If the export ban were not in place, this would not be a problem. The extra oil would be shipped to other countries with the appropriate refining capacity for light crude. Crude oil prices in the U.S. would then reflect global prices.
The strong argument for lifting the ban on domestically produced crude, allowing it to reach the marketplace, is about economics, improving the United States’ position in the world – both from a foreign policy and trading standpoint – stimulating more domestic output and benefitting consumers. It’s the right choice for America.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and five grandchildren.
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