Energy Tomorrow Blog
Posted August 11, 2015
The U.S. Commerce Department’s recent mid-year trade report illustrates how surging domestic oil and natural gas production is helping our economy – and strongly suggests what increased domestic output could do if U.S. crude oil and liquefied natural gas (LNG) had unhindered access to global markets.
According to Commerce, the U.S. trade deficit among petroleum and petroleum products fell 56.1 percent the first six months of this year compared to the first six months of 2014 (exhibit 9). That growth helped hold the total U.S. year-over-year trade balance steady, even as the trade deficit in non-petroleum products increased 23.1 percent. API Chief Economist John Felmy:
“Despite a very competitive global market, the U.S. energy revolution continues to push our trade balance in a positive direction. Oil imports remain on the decline, and strong exports of petroleum and refined products are creating new opportunities for America to bring wealth and jobs back to U.S. shores.”
For that trend to continue, though, the United States must pursue energy trading opportunities with the same vigor it pursues trade in other areas. A 1970s-era ban on crude oil exports should be lifted, and LNG export projects should be approved by the government so that domestic producers have every chance to access global markets.
Posted June 1, 2015
Pittsburgh Post-Gazette op-ed (Eberhart): ... Since 2000, global LNG demand has grown an estimated 7.6 percent per year. And that rate is expected to increase: Ernst & Young predicts that by 2030 global demand will reach 500 million metric tons, doubling 2012 levels.
At the same time, because of the surge of natural gas from American shale, the United States is awash in the stuff, with domestic natural gas production increasing 41 percent in the past decade alone.
Ten years ago we were an LNG importer. Today we’re the world’s largest natural gas producer.
And with the amount of technically recoverable natural gas in the United States 100 times greater than our current consumption, we have a boon to the economy that is expected to contribute up to 665,000 net jobs and $115 billion to GDP by 2035. We are expected to have enough gas to meet our own needs while also helping to satisfy staggering demand in places like Japan, Korea, India, China and Taiwan.
Clearly, this is an opportunity we don’t want to miss. But a protracted, redundant and expensive approval process could put it just out of reach.
Posted May 29, 2015
Reuters: The U.S. Congress could lift the 40-year old ban on domestic crude oil exports within a year as a drop in gasoline prices and the potential return of Iranian oil to global markets makes it an easier measure for politicians to support, Bank of America Merrill Lynch analysts said on Thursday.
U.S. gasoline prices have dropped since last year along with global crude prices, thanks to strong crude output from the United States, Saudi Arabia and Iraq. On Thursday, the U.S. average for regular gasoline at the pump was nearly $2.74 a gallon, down from $3.65 a year ago, according to the AAA motorist club.
If that remains the case, it has the potential to allay politicians' fears that they could be blamed any rise in gasoline prices if the crude oil export ban was lifted. If talks between six global powers and Tehran on Iran's nuclear program reach a deal on June 30, sanctions on Iran's oil exports could be removed soon after. That could also put pressure on global oil and U.S. gasoline prices.
Posted May 27, 2015
Wall Street Journal commentary (Engler and McGarvey): America’s business and labor leaders agree: President Obama and Congress can do more to modernize the permitting process for infrastructure projects—airports, factories, power plants and pipelines—which at the moment is burdensome, slow and inconsistent.
Gaining approval to build a new bridge or factory typically involves review by multiple federal agencies—such as the Environmental Protection Agency, the U.S. Forest Service, the Interior Department, the U.S. Army Corps of Engineers and the Bureau of Land Management—with overlapping jurisdictions and no real deadlines. Often, no single federal entity is responsible for managing the process. Even after a project is granted permits, lawsuits can hold things up for years—or, worse, halt a half-completed construction project.
Posted May 5, 2015
Energy Outlook Blog (Geoff Styles): The US Energy Information Administration's latest Annual Energy Outlook features the key finding that the US is on track to reduce its net energy imports to essentially zero by 2030, if not sooner. That might seem surprising, in light of the recent collapse of oil prices and the resulting significant slowdown in drilling. EIA has covered that base, as well, in a side-case in which oil prices remain under $80 per barrel through 2040, and net imports bottom out at around 5% of total energy demand. Either way, this is as close to true US energy independence as I ever expected to see.
It wasn't that many years ago that such an outcome seemed ludicrously unattainable. I recall patiently explaining to various audiences that we simply couldn't drill our way to energy independence. The forecast of self-sufficiency that EIA has assembled depends on a lot more than just drilling, but without the development of previously inaccessible oil and gas resources through advanced drilling technology and hydraulic fracturing, a.k.a. "fracking", it couldn't be made at all. The growing contributions of various renewables are still dwarfed by oil and natural gas, for now.
Posted April 28, 2015
EIA: In its recently released Annual Energy Outlook 2015 (AEO2015), EIA expects the United States to be a net natural gas exporter by 2017. After 2017, natural gas trade is driven largely by the availability of natural gas resources and by world energy prices. Increased availability of domestic gas or higher world energy prices each increase the gap between the cost of U.S. natural gas and world prices that encourages exports of liquefied natural gas (LNG), and, to a lesser extent, greater exports by pipeline to Mexico.
The AEO2015 examines alternate cases with higher and lower world oil price assumptions, which serve as a proxy for broader world energy prices given oil-indexed contracts, as well as with higher assumed U.S. oil and natural gas resources. These assumptions significantly affect projected growth in annual net LNG exports after 2017. Net LNG exports make up most of the natural gas exports in most cases. By 2040, LNG exports range from 0.2 trillion cubic feet (Tcf) in the Low Oil Price case to 10.3 Tcf in the High Oil and Gas Resource case. For comparison, 2040 natural gas net exports by pipeline range from 1.1 Tcf in the High Oil Price case to 2.9 Tcf in the High Oil and Gas Resource case.
Posted April 27, 2015
Wall Street Journal op-ed (John Hess): While one can debate the reasons for the Organization of Petroleum Exporting Countries’ decision in November to continue flooding the oil markets, the fact is that this is squeezing many U.S. shale oil producers out of business. Oil prices have dropped by 50% in the past six months, and crude oil inventories in the U.S. have grown from 350 million barrels last year to more than 480 million barrels today.
Part of the reason inventory has ballooned is that crude produced in the U.S. is literally trapped here, because American firms are not allowed to sell it overseas. An antiquated rule bans crude oil exports from the lower 48 American states, even though producers could earn $5-$14 more per barrel by selling on the world market. At this moment the U.S. government is considering lifting sanctions on Iranian crude oil exports. Why not lift the self-imposed “sanctions” on U.S. crude exports that have been in place for the past four decades?
The export ban is a relic of a previous era, put in place around the time of the 1973 Arab oil embargo against the U.S., when Washington thought very differently about ensuring America’s energy needs. Other measures related to the 1973 embargo, such as price controls and rationing, were eliminated decades ago, as policy makers realized that they impeded, rather than aided, American energy security. But the ban on crude oil exports persists.
There is no defensible justification for the continued ban on the export of U.S. crude oil.
Posted April 8, 2015
NOLA.com: Five years after the BP oil spill in the Gulf of Mexico, the oil and gas industry can respond and contain well blowouts offshore faster than ever before, said Don Armijo, CEO of the Marine Well Containment Co. But he said work remains to make sure containment equipment keeps pace with industry's push to drill in deeper waters.
Armijo, who spoke Tuesday (April 7) at a business lunch at The Roosevelt Hotel in downtown New Orleans, said Marine Well Containment Co. has the equipment to respond to oil gushers in up to 10,000 feet of water. The industry will outgrow that equipment, he said.
"We know there has been drilling proposed in areas much deeper than 10,000 feet of water," Armijo said. "That's the big thing. How do we actually get the technology put together so we can be deeper? These are the kind of things that are on our minds all the time."
Posted March 26, 2015
A welcome development in the larger effort to see the U.S. become a major player in the global energy marketplace: groundbreaking ceremonies this week at Maryland’s Cove Point liquefied natural gas (LNG) facility.
Gov. Larry Hogan joined other golden shovel-wielding dignitaries at Cove Point, built as an LNG import terminal but which is undergoing a $3.8 billion expansion to allow LNG export capability.
Cove Point and other proposed LNG export terminals are the key needed infrastructure for the world’s leading producer of natural gas to get its LNG to market.
Posted March 23, 2015
Washington Times op-ed (O’Keefe): Last month the White House submitted President Obama’s annual economic report to Congress. Nestled in the findings is a compelling case for lifting the country’s antiquated ban on natural gas exports.
“An increase in U.S. exports of natural gas, and the resulting price changes, would have a number of mostly beneficial effects,” the report states, for domestic employment, geopolitical security, our energy industry and the environment. The report ticks off numerous benefits — “create jobs in the short run,” “lower natural gas prices around the world,” “promote the use of cleaner energy abroad” — that make clear the question is not whether the United States should reconsider restrictions on natural gas exports, but when will policymakers step up to economic reality.
The value of lifting export restrictions on domestically produced liquefied natural gas (LNG) is becoming glaringly apparent. The Obama administration’s latest report not only adds to the body of evidence indicating now is the time to act, it reaffirms that doing so aligns with the president’s priority of promoting clean, sustainable energy here at homeand abroad.