American Crude Around the Globe

Back in December Congress passed legislation that shook up the U.S. energy industry for the first time in decades. Trade restrictions on U.S. crude oil were lifted, essentially freeing up one of the world’s most commonly traded commodities. Since that legislation has passed, the Energy Information Agency (EIA) reported the number of countries receiving U.S. crude oil has risen, and is continuing to rise.

Whether it’s a need for America’s light sweet crude or a stable energy source, U.S. energy is reaching destinations across the globe. And despite the smaller price spread between international and domestic prices as well as other factors that could impact crude exports, countries are still importing Uncle Sam’s energy.

According to the report, so far in 2016, crude oil has reached 16 countries with an exports average of 501 Mbpd in the first five months of this year. Canada, a long time importer of U.S. oil, remains the leader, followed by Curaco, Netherlands, and Japan. See the full list below:

 

canada

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

 

noncanada

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

However, in recent years, crude oil hasn’t been the only aspect of U.S. energy diplomacy. Natural gas production has increased, causing a rising demand from producers to export this energy abroad. Unfortunately, due to similar bureaucratic red tape that crude oil found itself tangled in, the application process for export terminals is slow and costly. As a result, other countries are taking advantage of this new market.

The notion that the U.S. is a rising energy leader is not false. In fact, as U.S. State Department Amos Hochstein said: “The U.S. is now the world energy superpower because of growth in our oil production, natural gas production capability.” But our delay in modern energy policy and lawmakers hestitation to prioritize trade of our abundant energy resources still threatens the future of the industry. This moment for American crude oil is an achievement for the industry, but policy should continue to push forward for an all-of-the-above energy strategy to keep the country moving forward.


Another Pin in the Map – Crude Aims for Southeast Asia

Since lifting the ban on crude oil exports, American light sweet crude is reaching far corners of the globe and, consequently, reshaping the word energy market. First making history aboard the Theo T, U.S. crude has since landed in France, Germany, the Netherlands, Israel, China, Venezuela, and Panama. Now rumors are circulating that soon Bakken crude could be headed to South Korea.

During a recent energy conference, Continental Resources CEO Harold Hamm announced that he is currently in negotiations to deliver the energy resource to Southeast Asia. Although this would add another pin in the global map for American crude, some experts are questioning the expense of transporting the crude to South Korea. But others argue that the price still makes economic sense in order for South Korea to diversify their energy sources and move away from Middle Eastern crude.

This move highlights a larger looming question that has energy enthusiast scratching their heads – Will OPEC remain a leader in the future oil market? Since projects in the U.S., Iraq, and, now, Iran, have come online, countries that have had to rely upon unstable energy sourced from the Middle East and Russia are now looking forward to new and better opportunities.

Although the impact of crude exports has not had a profound impression on American soil, the long-term timeline is where benefits are to be expected. As a result, oil traders in the U.S. are readying their supplies for more opportunities to stabilize the world oil market and help America’s foreign allies.


Addressing a Claim Against Crude

Recently a coalition of climate activists released a petition declaring a state of climate emergency in which they demanded President Obama use the power of his office to overturn last year’s decision by Congress to lift the ban on crude oil exports. Besides the fact that their call to President Obama would result in an unprecedented overreach of the executive branch’s powers, the petition fails to mention the reality behind our global energy landscape and the need for crude oil exports.

The crux of the petition hinges upon the notion that crude oil exports will hurt global climate change goals and our domestic environment through current oil extraction practices.

First to the issue of global climate change initiatives, the petition cites a report by the Center for American Progress (CAP) which argues that crude oil exports could lead to an increase in greenhouse emissions. However, CAP admits that “it is unclear the extent to which more exports of U.S. crude will encourage additional oil consumption and, therefore, add new carbon pollution to the atmosphere” rendering their statistics and claims questionable. And in reality, U.S. exports of crude oil are likely to replace exports from countries with weaker environmental controls than we have, thus reducing the growth of emissions globally.

Additionally, analysts such as Michael Levi and Varun Sivaram of the Council on Foreign Relations, find that the renewable energy tax credits promised in the same bill used to lift the crude exports ban, will reduce carbon emissions over the next five years more than allowing crude oil exports will increase them. Furthermore, investments into renewable energy also continue to climb despite what the petition claims. The “Global Trends in Renewable Energy Investment 2015” by the United Nations Environment Programme recently found that green energy investments, particularly in solar and wind energy, have increased by 17% since 2014.

Even the oil and natural gas industry is taking positive steps to advance energy technologies that will reduce greenhouse emissions. This includes the $90 billion investments that the industry made between 2000 and 2014 into low-and zero- emissions technology.

The second argument the petition makes about domestic environmental damage from oil and gas production also hold little water. The so-called damages from oil exports through hydraulic fracturing has been rebuffed by the U.S. Environmental Protection Agency. As recently as last year, the EPA concluded that they “did not find evidence that these mechanisms [hydraulic fracturing] have led to widespread, systemic impacts on drinking water resources in the United States.”

There is no question that climate change is a problem. But the facts also show that the economic and geopolitical benefits of oil exports are great, and that the foreign need for U.S. crude oil is unquestionable. They also confirm the measures that the oil and gas industry are taking in order to secure a more energy efficient future, while also balancing the demanding energy needs of today.

Voicing concerns about the future of the energy industry is fair and worthy to note, but it’s when some individuals and groups take these questions and turn them into reason to outright block an energy industry that reasonableness and reliability comes into play. U.S. crude oil exports provides an opportunity to deliver a secure source of energy to foreign allies, while also ensuring a standard of environmental safety is being met. As the United States moves into the global energy market, we must continue to think about an all of the above energy strategy and not get stuck debating on issues that has already been assessed in Congress. The necessary modern energy policy for the U.S. should consider both today’s needs as well as tomorrow’s.


The Achievements of Crude Oil Exports

It’s only been three months since Congress lifted the crude oil exports ban and yet speculations are increasing around the benefits of exporting American crude. Attempts to diminish the value of crude oil exports are both premature and illogical in light of the fact that arguments for lifting the ban were clearly outlined as long term benefits, as opposed to immediate. Global energy transformation cannot happen overnight, but despite what the price of crude might suggest, a shift is already starting to be felt throughout the energy market.

According to The Wall Street Journal, the spread between West Texas Intermediate oil and Brent oil has started to widen once more, allowing the flow of American crude to continue its trek across the globe.

The first shipment of crude oil from the United States was a historical moment as both Americans and foreign allies cheered on the shipment of “liquid freedom.” Even now, countries from around the world are starting to recognize the benefits of having a stable source of energy to turn to. So far, American crude oil has reached foreign ports and trading partners across Europe, including France, Germany, Italy and the Netherlands – relinquishing them from the grasp of Russian and Middle Eastern producers.

Oil-rich Venezuela is also turning to U.S. crude, and Japan is set to receive a supplies of oil in May. Another achievement for American crude is the first shipment crossing the Panama Canal, carrying 380,000 barrels of WTI to Nicaragua’s western coast. All in all, one cannot deny that U.S. crude oil is indeed wanted, if not needed, across the globe.

But all of these achievements are being tainted with reports stating that the U.S. is now importing more foreign oil than it has in the past three years. As Bloomberg points out, U.S. refineries are turning to heavy oil provided by Nigeria, Mexico, and Venezuela. But the key word is “heavy” oil. U.S. refineries were not initially built for America’s light sweet crude oil. Instead, our refineries were outfitted before the shale revolution to process oil from foreign imports. Therefore, the U.S. needs to import foreign heavy oil for refineries to operate. In fact, Venezuela’s reason for importing U.S. crude oil is the exact opposite of the U.S. – they have a need for light crude oil, not their heavy crude.

Lifting the ban on crude oil exports was the right move by Congress. The market might take time to adjust, but the geopolitical and economic benefits will bring long-term positive impacts to the United States and foreign allies.


U.S. Energy Pressures Russia and Other Energy Countries

Last December, Congress signed off on a provision in their massive omnibus spending bill that ushered in a new era for American energy. Now as shipments leave the United States with American crude, financial and political impacts of U.S. energy are finally being felt around the world.

At a time when competition is stiff and crude oil is flooding the markets, leading energy-producing countries are feeling the staggering weight of U.S. energy exports. Just last week, OPEC agreed for the first time in a decade and half to halt energy outputs to January levels. This move highlights just how much energy prices and the U.S. energy renaissance is eroding OPEC’s grip on the global energy market.

Russia in particular is worried what U.S. energy – both crude and natural gas – will do to their influence over Europe. Two shipments from the Texas Gulf Coast carrying West Texas Intermediate (WTI) crude have already landed in Europe where demand for domestically produced lighter crude oil remains high. An avenue in the Middle East also has opened up as American crude arrived in Israel, according to UPI. But even though the impacts of U.S. crude have not yet been felt economically, Mark Mills, a senior fellow at the Manhattan Institute, argues that “in geopolitics, psychology matters as much as actual transactions.”

However, as U.S. crude oil begins to enter the markets, some experts have predicted that OPEC will not adjust their production too much to satisfy the rest of the world. At an event hosted by the Foundation for Defense of Democracies, Robert McNally, founder and president of the Rapidan Group, recently emphasized that OPEC does not want to be seen as the global leader of production cuts.  Nevertheless Representative Joe Barton (R-TX) predicted that “the days of OPEC setting the price of crude oil are gone.”

“What we’ve done by repealing the export ban is put the U.S. producer in the driver’s seat. Quite frankly OPEC and Russia literally don’t know what to do,” Rep. Barton said. “So we’ve killed OPEC. It’s gone.”

Barton also argued that the U.S. is in a more powerful position today than ever before. Due to the rate of technological advancements over the past decade, America’s oil and gas reserves will continue to push the U.S. ahead of its competition.

America’s energy exports are continuing to grow and flourish in the global energy market. The demand for a stable source of energy has allowed the U.S. to place pressure on Saudi Arabia and Russia, threatening not only their financial standing, but also their political influence around the globe.


Oil Tax Bad Idea for American Consumers

In his FY 2017 budget plan released this week,  President Obama proposed a $10 per barrel oil tax as a way to fund a 21st Century Clean Transportation Plan and reduce fossil fuel emissions.   However, Obama fails to acknowledge that the burden of his oil tax will be passed on to the American consumer, a costly blow to the U.S. economy and energy industry dealing with the consequences of record low oil prices.

Over the years, our nation has been experiencing an energy renaissance that has resulted in Americans benefiting from lower energy prices. Consequently, the United States’ standard of living has increased as households are able to spend their new source of disposable income elsewhere.  But a tax on American oil threatens this new paradigm by increasing prices at the pump. According to the nonpartisan Congressional Research Service, the average cost of gas will increase by 24 cents per gallon, when fully implemented. This isn’t a tax so much as an aggressive attack on energy companies that would in turn raise the cost of living for Americans.

But the burden doesn’t stop there. The oil tax would be instilled on all domestically produced crude oil as well as imported crude and petroleum products into the U.S., placing further stress on an industry that’s seeing one of its worse recessions in years. As a result, energy companies will be forced to lower wages and cut jobs even more than the current environment. Senator Lisa Murkowski (R-AK), Chairman of the Senate Committee on Energy and Natural Resources, expressed her disapproval  for attempting to single out the oil industry: “The President should be looking at ways to make our energy sector more competitive, not pushing new policies that will cost jobs and raise prices.”

As the budget review process begins, Congress should take into account the effects this oil tax will have on our nation. Not only would it be detrimental to a suffering industry, but also to the nation as a whole.


Preparations are Underway as Crude Oil Exports Begin

Three tankers of U.S. crude have landed in Europe, delivering the first shipments of U.S. energy resources since Washington lifted the 40-year-old ban on crude oil exports. Although few are expecting U.S. oil to flood the world market right away, the arrival of American crude to foreign nations marks a symbolic moment for the U.S. in the current restructuring of our energy landscape.

As energy companies look to make the next move beyond Canada and Mexico, the initial push of crude highlights the notion that, “traders are already finding ways to profit by shipping American oil abroad” (Financial Times). This is especially significant since the blend of U.S. light sweet crude is beneficial to European refineries making it more attractive to foreign markets.

Image Courtesy of Financial Times

(Image Courtesy of Financial Times)

The increased traffic also has U.S. ports gearing up for preparations of crude oil exports for the long-term, including the Port of Corpus Christi which is uniquely located near large shale plays.  “With the lifting of the export ban, we will see more momentum and more dollars allocated to that project by the federal government,” said Sean Strawbridge, Port of Corpus Christi chief operation officer.

Texas Governor Greg Abbot also welcomed the new era of crude oil exports, tweeting out, “Texas is now shipping oil. This is great for our jobs and economy.”

 


Landmark Shipment of U.S. Crude Oil to the Far East

U.S. oil producers have something else to cheer about in the new ear of crude oil exports. After successfully exporting the first shipment of U.S. crude to Europe, American companies are now looking forward to adding another stamp to their passports; this time in China. In a recent article, Reuters  reports that China’s state-run Sinopec Corp has purchased a shipment of U.S. crude oil set for export in March.

Amid the fight for oil exports domination, China’s imports have increased exponentially. This past December, China reached a new record of importing 7.82 million barrels of crude oil a day. In addition, Reuters reports that Sinopec, “Buys more crude oil than almost any other company,” creating an ideal situation for companies looking for long-term trade deals. More importantly, a majority of China’s imports come from unstable areas of the world like Africa and the Persian Gulf, resulting in Sinopec looking, “To improve its supply security by seeking out diverse sources.”

While the first exports to Europe were cause for celebration, U.S. crude oil exports to the Asia-Pacific would create tremendous benefits. According to a recent policy brief by the American Council for Capital Formation (ACCF), George David Banks, ACCF executive vice president and author of the brief, argues for exporting U.S. energy to China to bolster China-U.S. relations. ACCF forecasts that not only would America be able to ease China’s dependence on energy from unstable sources, but a new partnership could help ease growing geopolitical concerns of relationships between China, Russia, and Iran.

“Bolstering the United States’ relationships with foreign superpowers like China is critical to securing a safer and more prosperous future, and one avenue to achieve that goal is through the unfettered trade of U.S. energy,” said Banks. “Our nation’s affordable and abundant energy resources have the potential of bridging cultural differences and generating lasting regional partnerships while easing potential conflicts in the Asia Pacific and across the globe.”

With this shipment, the U.S. is further cementing is position as a global leader in energy and gaining a valuable trading partner.


The Power of American Exports

The U.S. energy boom has grown far more than ever expected, allowing us to surpass both Saudi Arabia and Russia as the world’s leading producer of oil and natural gas. And now that the ban on crude oil exports has been repealed and the first shipment of oil has arrived in Europe, Americans will hopefully begin to see the many benefits of U.S. participation in the new global market.

In a recent Fuel Fix article, Brigham McCown, former senior official at  the U.S. Department of Transportation, argues that it’s imperative for the U.S. to “take full advantage” of our new leading role in global energy. “The potential for advancements abroad as a result of stable energy supply to our allies is undoubtedly impressive. But it is the economic growth here at home that will be felt the most by consumers,” McCown said. Many studies, including the Aspen Institute, forecast that the American economy will grow and job numbers will increase due to the ban lift. Most notably, the non-partisan Congressional Budget Office states that crude exports will generate $1.4 billion for the economy.

Crude oil exports will also help spur investment along the Gulf Coast as companies prepare to take full advantage of foreign buyers as they begin to realize the benefits of a stable source of energy. A new report by Wood Mackenzie Ltd found that low oil prices have delayed $380 billion worth of investment on 68 major upstream projects. But access to global markets can change that. Some experts have even predicted that “in the longer term, Latin America and Asia could become natural markets” especially as a massive expansion of the Panama Canal becomes complete (The Wall Street Journal, “U.S. Exports First Freely Traded Oil in 40 Years,” by Alison Sider).

In the long term, the benefits of crude oil exports are countless. But as the first shipment of American oil finally reaches its European destination, other energy-producing, unstable countries cast a wary eye on Uncle Sam’s new gift.


New Year, New Markets

The era of crude oil exports has begun. With the start of the New Year, ConocoPhillips and NuStar Energy LP exported the first shipment of U.S. crude oil into the global market after a 40-year ban. The move underscores the United States’ shift towards a modern energy policy bringing energy security to ourselves and foreign allies.

Sailing from Corpus Christi, Texas, the crude oil was purchased from the Dutch international trading company, Vitol Group, and is set to arrive in Italy. Vitol’s quick response to purchase American crude suggests that predictions of European refineries’ increasing desire to obtain sources of energy from the U.S. are correct. And paired with Russia’s unstable economy due to sanctions, Europe has every reason to turn to the U.S. as a stable source of energy.

The geopolitical implications of allowing U.S. crude exports are further underscored by increased tensions in the Middle East. According to The Wall Street Journal this, “Serve[s] as a reminder that, despite the sharp fall in oil prices over the last two years, the Middle East, which produces almost one-third of the world’s crude, remains a volatile region.”

The immediate lunge from American companies to export their crude oil is also impressive. Less than two weeks after the federal government lifted the restrictions, ConocoPhillips was the first to export, followed by others including Enterprise Products Partners LP. This swift action highlights America’s capability to export crude oil quickly and efficiently, especially from ports along the Gulf Coast where pipeline infrastructure and American tankers are readily available.

The floodgates have been opened. After 40 years, the United States is exporting crude oil and will further cement its place as the globe’s leader in energy.