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Foreign Tensions Shows Need to Open Energy Exports

Investor's Business Daily

To see why Washington should immediately eliminate the 40-year-old export ban on crude oil and natural gas, just take a look at the leading oil exporters and importers.

According to the U.S. Energy Information Administration (a government agency), in 2012 the top 10 exporting oil countries in descending order were: Saudi Arabia, Russia, United Arab Emirates, Kuwait, Iraq, Nigeria, Qatar, Iran, Angola and Venezuela.

Together they exported about 32.1 million barrels of oil per day.

And the top 10 importers were: the U.S., China, Japan, India, South Korea, Germany, France, Spain, Singapore and Italy.

Together they imported 29.5 million barrels of oil per day, according to the EIA.

Do you see the problem? Most of the top oil exporters are run by strongmen or Arab dynasties. As for the others, Nigeria is only ranked "partly free" by Freedom House, while Iraq is in chaos and much of its oil production could begin financing terrorism in the near future.

By contrast, with the exception of China, all of the top 10 importers are democracies that embrace freedom and the rule of law. In short, the free countries are heavily energy-dependent on the unfree countries. Since energy is the lifeblood of any major economy, that is not a good situation.

And that's why energy access is the most important long-term security threat facing both the U.S. and our democratic allies. The only way to address this problem is for the U.S. to crank up energy production as much and as quickly as reasonably possible, remove all restrictions on oil and natural gas exports, and encourage our allies to do the same.

And not just encourage them, but provide them with the needed expertise and sell them the needed equipment and technology to do it.

Of course, critics may point out that the U.S. has a long-standing positive relationship with Saudi Arabia, as well as some of the other exporters. True enough, but developments and rising tensions in the Middle East could change that.

The U.S. is a strong supporter of Israel — though maybe not as strong as we used to be. What if the Saudis decided that U.S. support for Israel was no longer tolerable and gave an ultimatum: Forget about Israel or forget about Saudi oil imports. Which would the U.S. choose?

Nearly 20% of the world's oil and global liquefied natural gas (LNG) are shipped through the Strait of Hormuz, which is controlled by Iran and Oman. Suppose Iran threatens to close the Strait — as it has threatened in the past — if the U.S. continues to support Israel or tries to neuter Hamas. What would the U.S. do?

Russia has long used oil and natural gas as a foreign policy bludgeon against its neighbors. About 16% of Europe's natural gas currently comes from Russia, via Ukraine.

Suppose Russia says that any country imposing economic sanctions on it will no longer receive natural gas supplies — a scenario that's only made unlikely because Russian president Vladimir Putin needs the money. What would the U.S. do then?

While none of the above scenarios is imminent, all are possible. The last thing the U.S. needs is to have its foreign policies being dictated by a dictator. But the only way to ensure that doesn't happen is to go full speed ahead with energy production and export.

We need to produce as much energy as possible so we have it in case of shut-off threats, and we need to crank up our export capabilities so that our allies can have the energy if they need it.

We cannot wait until Russia or Iran or the Saudis turn off the spigot. It takes years to develop an energy transportation infrastructure, especially for exporting large quantities of LNG — which is why we have to start now.

For decades, the primary energy producers have been countries that do not share the major democracies' values. And yet the democracies' economies are dependent on those producers.

New innovative drilling techniques have made it possible to reduce or eliminate that stranglehold. We have no one to blame but ourselves, and especially the Obama administration, if we don't.