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December 23, 2016

Lifting Energy Export Ban Fuels Our Economy

  Houston Chronicle

What could turn out to be President Barack Obama's most effective economic policies only happened in the twilight of his presidency: ending the 40-year ban on U.S. crude oil exports and approving construction of terminals to export U.S. liquefied natural gas (LNG). And the advent of a Donald Trump presidency likely means an expansion and acceleration of those efforts.

Last December Congress passed a $1.1 trillion spending bill that included the crude oil export ban repeal. The president opposed the repeal, but the bill also extended the wind and solar energy tax credits, so he took the compromise. By contrast, liquefied natural gas export terminals only require Department of Energy approval. And even though permits have been slow in coming, several have finally been approved.

That action has jumpstarted the U.S. oil and gas export business, with Texas LNG terminal projects underway in Freeport, Corpus Christi and Brownsville.

In the first five months of the year, the U.S. exported half a million barrels of crude oil per day to 16 countries—including several in Europe, South and Central America, Israel and even China—according to the U.S. Energy Information Administration (EIA).

Meanwhile, the first U.S. tanker with LNG departed from Louisiana last February. In the first six months of the year, some 50 billion cubic feet (Bcf) of natural gas has been exported. One Forbes.com energy analyst estimates the U.S. will be exporting about 7 Bcf per day by 2020 and 17 Bcf/day by 2040. The U.S. currently produces about 80 Bcf/day.

The nascent energy export industry is important for several reasons.

First, while the U.S. still consumes more oil than it produces, the EIA projects the U.S. will become a net gas exporter in the second half of 2017. The U.S. needs markets for that abundance of natural gas.

Second, exports enhance economic efficiency. For those who wonder why U.S. companies would export crude oil when the country still imports 24 percent of its oil, the answer has to do with efficiency and refining.

Most U.S. refineries are set up to process very heavy oil. But most of the oil coming from shale formations, comprising about 52 percent of total production, is what’s called light sweet crude, which requires a different, less-intensive refining process. While some refineries are starting to adapt to the lighter crude slate, that refining transition isn’t quickly or cheaply made.

In addition, the closest refineries may be operating at or near capacity. Instead of having to discount or store a regional oversupply of crude oil, it may make more sense for oil producers to export it to refineries abroad that have the capacity to handle it.

Third, U.S. exports could help meet the energy needs of some or our allies—especially those dependent on oil and natural gas from countries like Russia, which use energy supplies as a geopolitical hammer.

The European Union depends on Russia for about a third of its energy needs, and the EU would love to have an affordable alternative.

Finally, exporting crude oil and natural gas will jumpstart economic growth and reduce the U.S. trade deficit.

Energy experts Daniel Yergin and Kurt Barrow, writing in the Wall Street Journal in 2014, estimated that ending the oil export ban would:

· Lead to a production increase of 2.3 million barrels of oil per day and $1 trillion in new investment;

· Create 860,000 more jobs, many of which would be high-paying blue-collar jobs; and

· Add $3 trillion in federal revenues—important for a country about to pass the $20 trillion mark in total federal debt.

The energy boom over the past eight years provided real economic benefits during a time of sluggish economic growth. Without it, the country might well have fallen into recession.

Oil and natural gas exports will allow us to extend and expand that boom and become the world’s energy-producing powerhouse. But doing so requires faster approvals of LNG terminals and an easing of federal opposition to drilling offshore and on federal lands, both of which President-elect Donald Trump has pledged to do.

This piece also appeared in the Gaffney Ledger (Jan. 18, 2017) the Queen Creek Independent (Jan. 16, 2017) and the News Democrat Leader (Feb. 1, 2017).


 

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