Exports: Harnessing America’s Energy Wealth

Mark Green
Posted October 6, 2014

We’ve posted a number of times on the merits of U.S. energy exports, because whether the subject is exporting crude oil or natural gas, there are compelling economic and energy reasons to lift restrictions on America’s ability to be a major player in global markets. While those restrictions remain, America and Americans lose.

A number of studies have said that energy exports will benefit our economy and stimulate more domestic production – here, here and here on liquefied natural gas (LNG) and here and here on crude oil. A new report from Columbia University’s Center for Global Energy Policy added that LNG exports could help strengthen the United States’ foreign policy hand.

Thanks to abundant oil and natural gas reserves, advanced hydraulic fracturing and horizontal drilling and investments by a robust industry sector, the U.S. is the world’s No. 1 producer of natural gas and is about to become No. 1 in oil output (subscription required). Yet, because of self-imposed and outdated (in the case of the crude oil) export restrictions, the U.S. isn’t harnessing its energy potential as it could and should.

It’s good that the Obama administration has approved a handful of LNG export applications, though many more remain in limbo, even as the global LNG market takes form. It’s good that the administration is “actively looking” at the issues surrounding crude oil exports, as Energy Secretary Ernest Moniz said this week in New York City. But the studying and discussing should lead to action, not endless conversation. Moniz:

“The international energy markets clearly look very, very different from what they looked like in 1975. It’s worth a re-examination. … There has been no policy change in terms of crude oil exports. We are actively looking at the issues of the changed production profile, the changed nature of the oil being produced, the refinery situation, etc. There is consideration of that going on. If there are new policies called for, those will be considered.”

The economic benefits of exports are clear – and those benefits are being denied to the U.S. economy and individual Americans with each passing day and month. The U.S. energy revolution could pay the price. Washington Post columnist Robert J. Samuelson, writing about the ban on crude oil exports:

By all logic, we should be working to sustain the boom. We aren’t, and therein lies a classic example of how good policy is held hostage to bad politics and public relations. What would promote continued exploration is a lifting of the current U.S. ban on exporting crude oil. Let producers sell into the world market.

Samuelson itemizes the potential benefits: job creation, reduced U.S. net oil imports and stabilization of the global oil markets, which already has occurred. Leadership is needed to move policy decisions that will bring changes, he writes:

One task of political leadership is to … to find ways and words that build public understanding and support for policies requiring patience. Events are forcing the ban on crude exports onto the political agenda. The economic and strategic implications are huge. How we address them will measure our seriousness.

IHS Vice Chairman Daniel Yergin, at a discussion of the crude export ban hosted by Arent Fox last week:

“Again and again we’ve seen how both policy and thinking have to catch up with changes – the world changes. … In the case of energy it’s actually a happy story, a better story about thinking and politics catching up. … I heard an eminent scientist talking about breakthroughs and saying the breakthroughs happen often as ideas that overturn dogma, and that’s of course what we’ve seen in this unconventional revolution in oil and gas, when it was really thought this could not happen, it didn’t fit the theories of how things could work. … One hesitates to use the word ‘revolution,’ but in this case it really does apply. … The thing that I find most puzzling about it (the export ban) is that it’s so puzzling.”

More Yergin:

“Lower oil production will result if this ban remains in place. … Consumption is going to be determined by policy, by what kind of cars people drive and so forth, and what happens with population growth. The real question is will the oil be produced in the United States, with all the benefits it brings in terms of the supply chain and economic development, or is it going to be produced in some other country, and the revenues will flow into their treasury and go to other purposes? … It makes sense to let the market shape these things, not policy that is really from a very different era.”

Yergin’s analysis of the debate over the crude oil ban is clever and also spot on: It’s puzzling that it’s puzzling – that protracted debate is required on an issue that offers such clear, positive impacts. The same may be said about the LNG export debate.

The reality is that with its reserves of oil and natural gas, the United States can be a major exporter, maximizing the benefits of America’s energy wealth – globally and here at home. It will require the U.S. to act like the energy superpower it is, allowing U.S. energy to reach global markets, helping our allies abroad and spurring more production at home. In short: It’s the economics.

It’s a key part of America’s golden energy opportunity – if America chooses energy.