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August 8, 2017

Energy Independence Is Close, but Not Close Enough

 

The U.S. is transitioning to a net natural gas exporter.
 
According to the U.S. Energy Information Administration (EIA), U.S. natural gas exports exceeded imports for three of the first five months of this year.
 
“The United States has been a net natural gas importer (on an average annual basis) for nearly 60 years. Declining net pipeline imports from Canada, growing natural gas pipeline exports to Mexico, and increasing exports of liquefied natural gas (LNG) are all contributing to the nation’s ongoing shift toward being a net exporter,” writes the EIA.
 
It’s an important milestone for a number of reasons—a milestone achieved in spite of the Obama administration’s best efforts to restrict fossil fuel production.
 
Increased U.S. production means we import less and export more. The ONLY reason the EIA can write this story is that innovative drilling techniques have allowed the U.S. to become a natural gas-producing powerhouse.
 
With increased production in a number of states, especially in the north, the need to import from Canada has declined.
 
And increased production, especially in Texas, allows us to export more natural gas to Mexico, which still struggles to produce efficiently because of the government’s control over the oil and gas industry. Numerous new pipelines are currently under construction from Texas into Mexico to facilitate that trade.
 
The North American Free Trade Agreement (NAFTA), which President Trump has put in limbo, included an energy trade component. The president needs to consider that in future North American trade negotiations.
 
Increased gas exports and reduced imports affect the U.S. trade deficit. IPI, along with many economists, doesn’t believe the U.S. trade deficit has a significant economic impact, but some people do—especially President Trump. Growing U.S. natural gas exports will help reduce that deficit.
 
The U.S. is one international crisis away from an oil or gas shortage. While crude oil and natural gas production are growing, the U.S. still imports about 10 million barrels per day of crude oil and other liquids. And that supply could be threatened at any time.
 
The EIA recently reported that 61 percent of crude oil production passes through maritime routes. “Many of these products transited the Suez Canal and the SUMED Pipeline, the Bab el-Mandeb Strait, and the Strait of Hormuz [i.e., Iran] chokepoints around the Arabian Peninsula.”
 
In addition, the U.S. imports nearly 800,000 barrels per day from the quickly failing state of Venezuela. If that supply were to collapse, the U.S. would be in a crude oil pinch.
 
So while the U.S. is transitioning to a net natural gas exporter and is currently able to obtain the crude oil it needs, all of that might be threatened by one international crisis.
 
Until the U.S. achieves energy independence—by whatever mix of fossil fuels and clean energy—it should continue its efforts to expand oil and gas production.


 

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