The Realities of Energy Independence

The goal for energy security has dominated Washington, D.C. since the 1970’s Arab oil embargo left consumers with empty wallets and standing in long lines at the gas pump. Forty years later, our energy landscape has shifted as the U.S. leads in world production of oil and natural gas. However, policies from years past restricting crude oil exports still haunt us and threaten the very goal politicians have been striving for – energy security.

In a recent article in The Wall Street Journal, Jason Bordoff, former energy advisor to President Obama, explains how America’s isolationist approach towards energy security does not reflect today’s realities. Bordoff, now a professor of professional practice in international and public affairs, and founding director of the Center on Global Energy Policy at Columbia University, argues that because today’s world markets are highly integrated, an isolationist approach no longer reflects the world we live in. He explains that today’s “oil market is the largest and most liquid commodity market on earth.” Therefore, if a country, for example Saudi Arabia, stopped sending oil to the U.S., our markets would not be harmed to the extent of the 1970s embargo. Companies would just move on and buy it from other suppliers.

Bordoff’s argument against energy independence is further underlined when he explains that “we are more secure, not less, when energy markets are interdependent,” but stresses that “import dependence should not be confused with energy independence.” By exporting and importing energy, the U.S.’s goal of energy security will flourish through the interconnectedness, competition, and interdependence of world markets.

On the other hand, there are those who have used energy as a means to threaten others. Bordoff argues that Europe’s lack of interconnectivity has resulted in Russia’s use of gas as a political weapon. As a result, it’s critical that Europe “complete[s] regulatory and infrastructure reforms that make the European market more integrated, promoting competition and building pipeline reversal capability and interconnectors to allow gas to move more freely around the continent.”

An isolationist approach with any commodity is simply not the right choice in today’s globalized world. And yet, the U.S. continues this solitary effort by restricting and banning our energy exports. This limitation doesn’t reflect the realities of our interconnected markets nor is it reasonable. In order to flourish, Congress needs to take action to allow U.S. energy exports to join the global market. Lifting the ban on crude oil exports is the path to take and will bring positive benefits of energy security back to the U.S.

Experts Discuss Growing Asia-Pacific Energy Demand and the Need For U.S. Energy Exports

More than 40 thought-leaders and Hill staff filled the historic Kennedy Caucus Room of the Russell Senate Office Building on Tuesday morning for an hour-long discussion on U.S. energy policy which concentrated mostly on the decades-long ban on exporting domestic crude oil. Hosted by the American Council for Capital Formation (ACCF), the policy briefing examined the role that free trade of American energy resources could play in bolstering international security and strengthening global energy markets.

“The United States finds itself in the enviable position of being able to provide the global market with abundant and reliable energy resources and at the same time strengthen U.S. foreign policy,” said ACCF Executive Vice President George David Banks. Banks was one of the panelists at today’s forum and he also recently released a white paper, Managing Pacific Rim Security Risks With U.S. Energy, that explores how the country’s energy abundance could help bolster confidence in security of supply and reduce tensions in the South China Sea.

The event kicked off with a keynote address from U.S. Senator Cory Gardner (R-CO). A member of the Senate Energy and Natural Resources and Foreign Relations Committees, Senator Gardner discussed the impact of the energy sector on his state’s economy and talked extensively about his overseas travels underscoring the critical need for American energy exports.

“We have antiquated policies that were put in place in the 1970s that prohibit us from exporting our crude oil, yet we have allies around the globe asking the United States to provide them with a stable supply of energy,” Senator Gardner said. “We should change this policy in order for the U.S. to be a global leader and to support our allies by making them less dependent on energy from hostile nations.  I am hopeful that Congress can lift the crude export ban this year – there are still opportunities for this to pass.”

The panel was moderated by Jeffrey Kupfer, a former U.S. Deputy Secretary of Energy and now an adjunct professor of policy and management at Carnegie Mellon University’s Heinz College. In addition to Banks, the panel was filled out by Clara Gillispie, director of Trade, Economic, and Energy Affairs at the National Bureau of Asian Research and Takashi Kume, special advisor at the Japanese Ministry of Economy, Trade and Industry.

“Over the last three decades the Asian economic miracle has lifted 1 billion people out of poverty,” Gillispie said. “But with 700 million people still without regular access to energy and demand forecasted to continue to rise, ensuring access to adequate energy supply that can sustain economic growth is a key issue for the region. Because of the scale of Asia’s demand, regional self-sufficiency, especially in China, is not realistic. Stakeholders in Asia are closely following the debates surrounding the U.S. ban on crude oil exports, as many see reform as a step that could ease concerns about pricing and supplies and sends a significant signal to the Asia-Pacific region about our commitments to free trade and open markets.”

According to the U.S. Energy Information Administration (EIA), U.S. oil import dependence is expected to be just 14 percent by 2020, down from a high of about 60 percent in 2005. In contrast, China is expected to buy roughly 70 percent of its oil from foreign sources within the next few decades. The ACCF policy paper identifies numerous geopolitical and economic opportunities embedded within America’s skyrocketing energy supply and China’s diminishing energy security.

“It’s not too late for Congress to take action this year,” concluded Banks. “There are several must-pass bills on the agenda that will soon land on President Obama’s desk. We need crude oil exports language on those bills. It’s time for our leaders here in Washington to finally say goodbye to the energy policies of the past and embrace an energy policy for the future.”


Low Prices Could Mean Trouble If U.S. Doesn’t Step Up With Exports

This week, the International Energy Agency, released its annual World Energy Outlook, which found international crude oil prices won’t return to the $100 per barrel mark anytime soon.  But the 700 page analysis, looking at a range of supply and demand scenarios across the globe, did come out with some concerning predictions as a result of our current low price environment.

According to the report, global energy demand is expected to grow but current cheap oil prices have the potential to give more market power to low-cost producers in the Middle East. They state that the world’s reliance on Middle Eastern oil exports could “eventually escalate to a level last seen in the 1970s,” especially in developing Asian countries like India and China, if oil prices stay low well beyond 2020. This raises serious concerns about energy security for oil-importing nations, many of which we hold strategic partnerships. Countries like Japan, South Korea, and Taiwan – all suffer from a lack of strategic resources – are each over 90 percent dependent on energy imports. And with China slated to become the world’s largest oil importer before 2020 this could pose a serious threat to U.S. interests.

But we can change this prediction. By participating in the global market we will create supply diversity that would not only help prices, also bring about greater political and diplomatic flexibility. Yet, antiquated federal laws continue to limit U.S. energy exports, hamstringing our ability to use these resources for good – ultimately failing our allies overseas and jeopardizing our reputation as a nation which supports  free trade.

Additionally, the report noted that the sustained plunge in prices could mean U.S. tight oil production stumbling. They state, “if prices up to 2020 remain under $60/bbl, without a rapid evolution in drilling efficiency and technology learning, tight oil production in the United States will likely see a substantial decline in output.” But if we were to repeal the ban on crude oil exports we could ensure production stays high.  An analysis done by Columbia University estimates that lifting current crude export restrictions could increase U.S. crude production by up to 1.2 million barrels per day between now and 2025. Therefore by repealing this outdated export ban we will incentivize production for years to come and ensure the positive economic predictions outlined by over six macroeconomic studies are fulfilled.

It is time for the United States to seize the moment and use its abundant energy resources to spur American production and innovation while making the world a safer place.

New Policy Brief Cites Free Trade of U.S. Energy As Key to Advancing U.S.-China Relations

Increased tensions in the South China Sea raise concerns on China’s growing dependence on foreign energy. According to a new policy brief released today by the American Council for Capital Formation (ACCF), a window of opportunity has emerged for the U.S. to strengthen relationships between the two global economic powers by exporting America’s abundant energy resources. But in order to successfully ease tensions in the region, free trade of U.S. resources such as crude oil and liquefied natural gas (LNG) needs to be established.

“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 George David Banks, ACCF executive vice president and author of the report. “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.”

Thanks to the energy boom over the past decade, the U.S. has now surpassed Russia as the number one developer of oil and natural gas in the world. As a result, our capability for exporting energy has risen while our dependence on oil imports continues to decline. In contrast, as Banks points out in the report, the Energy Information Administration (EIA) has predicted China to have an “import gap of roughly 14 million barrels per day by 2040 or more than 70 percent of consumption of petroleum and other liquids…” This comparison between the two nations highlights the United States’ ability to step in and provide China with much-needed energy.

However, the outdated ban on crude oil exports limits the United States’ capability to leverage those resources. If lifted, the U.S. can provide a new stable source of energy to China and Asian allies, relinquishing Russia’s unreliable grip on the region. The ACCF paper emphasizes the need for, “A multilateral, regional commitment in partnership with China … one that would guarantee the free flow or trade of energy resources.” Otherwise, the U.S. is risking the rise of conflict in the region as the demand for energy reaches a tipping point.

Measures to allow free trade of energy resources are needed not only to bring benefits to the U.S., but also to secure a meaningful role in the world’s energy market. By allowing restrictions on our energy resources, the U.S. continues to undermine global security and threaten free trade. The United States has been given an opportunity to extend a hand to another leader in the global economy, and by doing so, will strengthen political and economic stability in the Asia Pacific.

A link to the paper can be found here.

Small Businesses, Big Opportunities

After legislation to the lift the ban on crude oil exports passed in the U.S. House of Representatives earlier this month, small businesses have been keeping a critical eye on Washington’s legislative scene as allowing crude oil exports would bring them significant economic opportunities in the newly opened energy market.

Forty years ago, the U.S. banned crude oil exports as a result of the Arab oil crisis with the goal of achieving energy independence and protecting consumers from fluctuating oil prices. However, over the past decade, America’s energy boom has brought an influx of energy resources into our markets, but because of the ban, our economy, businesses, and consumers are not reaping the full benefits of America’s energy renaissance.

Small businesses in particular feel the pinch when they are limited in where and who they can sell to. Take First Titan Corp. based in Florida. Sydney Jim, FTTN CEO, explained that if the ban is lifted, small businesses could expand their markets and “easily move oil to places more willing to pay a fair price.” The reality is this is not just a boon for “Big Oil” but small business and U.S. workers – like those of First Titan Corp. – stand to see significant gains if our country sheds outdated energy policies. “Free trade is always good business,” Mr. Jim said.

Following the House vote, Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council, weighed in on the benefits crude oil exports would bring to the nation’s small businesses:

“Opponents of today’s vote on legislation that lifts the ban on crude oil exports claim that changing this archaic policy is a handout to large energy companies at the expense of American consumers. But this statement is simply false. All Americans, especially small businesses at the center of America’s energy renaissance, stand to see significant gains if our country sheds the 70s-era energy ban. Think tanks and government agencies alike agree that American consumers will enjoy lower gasoline prices, and communities throughout the country will see industry investments that will continue to generate thousands of high-quality jobs, millions in state tax revenue, and new businesses to support the industry’s growth. The reality is the energy industry’s vast supply chain and American small business is one in the same. It is clear crude oil exports will be a boon to entrepreneurs, the thousands of small businesses that work in the sector, and Main Street America.”

American’s small oil and natural gas businesses play a key role in the nation’s energy sector and removing the e crude exports ban would go a long way towards helping them in an economy still finding its footing.  It will stimulate economic development, improve job growth, and allow them to compete in energy markets. As the Senate prepares to vote on the proposed legislation, they need to remember that small businesses rely on this passage just as much, if not more, than larger companies do.

The House Sets the Stage for Senate on Crude Exports

It may have escaped the attention of many Americans, but last Friday the House of Representatives voted to reverse a policy that has been in place since President Richard Nixon sat in the Oval Office.  First enacted in the 1970s, the ban on crude oil exports was a reaction to the Arab Oil Embargo and falling U.S. energy production. Now, the U.S. is the largest producer of oil and natural gas, and this obsolete policy has suppressed our market growth, costing jobs and harming our national security. However, the U.S. House of Representatives is now setting the stage for a new era of energy by passing legislation on lifting the crude oil exports ban.

Introduced by Representatives Joe Barton (R-Texas) and Henry Cuellar (D-Texas), the bipartisan legislation received overwhelming majority approval with a 261-159 vote. Of the over 260 votes in favor, 26 Democrats voted in support of the measure, and not all from traditional energy producing states.  But the debate is not over, the legislation now heads to the Senate with a looming White House veto threat. However, lawmakers on both sides of the aisle support the bill and encourage the White House to look at the benefits of lifting the ban. “Putting an end to (the export ban) is a discussion we need to have by working together, and it shouldn’t be a partisan exercise or get bogged down by political poison pills,” Senator Heidi Heitkamp (D-North Dakota) said. “We have many options to move this policy forward and growing support for it. That’s good news for a common-sense, bipartisan policy.”

The benefit of energy security is one of many positive advantages to lifting the exports ban. It would strengthen America’s national security and weaken unstable energy producing nations such as Russia and Iran. “Let’s use the peaceful tools of energy development while creating jobs in America [to] replace the weapons of war in Europe and the Middle East.” Representative Kevin Cramer (R-North Dakota) said. Another added benefit is the potential trade alliances that will prosper from finally allowing free trade of our natural resources.

As momentum continues to push energy policy into the spotlight, the exports ban will remain a hot-button issue in the coming months. Both the White House and the Senate should heed the bipartisan support for updating the nation’s energy policy.  Let’s all take advantage, Republicans and Democrats alike, and realize our energy potential and the multitude of economic and national security benefits that will come our way.

To see the results for H.R. 702’s vote please follow the link here.

House Vote to Clear the Way for Crude Oil Exports is the Right Policy Move

After much anticipation, the U.S. House of Representatives voted on Friday to pass legislation lifting the 40-year-old ban on crude oil exports. The following day, Dr. Margo Thorning, senior vice president and chief economist of the American Council for Capital Formation (ACCF), appeared on CSPAN to discuss the multiple reasons why allowing crude oil exports is good for our nation and the world.

Throughout this debate we have heard in detail how   crude oil exports will be good for the U.S. economy. This is undeniably true – countless studies have proven crude oil exports will increase GDP and create more jobs. However, on the flip side, if the current policy is kept in place, many Americans will lose their jobs due to rig closures. During her interview, Dr. Thorning highlighted this consequence, noting   “We’ve lost over 100,000 jobs in the oil industry, so the American public should be cheered that this House bill passed with a good number of Democrats yesterday. That’s a step forward in removing this unneeded, obsolete ban.”

In addition to the clear economic benefits, supporters of removing the ban also focus in on the national security implications. If lifted, the U.S. – the leading producer of oil and natural gas – will become a major player in the global energy arena.   This will provide energy security not only for ourselves, but for our allies as well. In her interview, Dr. Thorning notes this benefit, focusing on our allies and their need for a reliable source of energy as well as the “diplomatic reasons to build ties with our trading partners by supplying them our crude oil.” Allowing crude oil exports would in fact let peaceful negotiations and global trade partnerships to flourish resulting in greater global prosperity.

The House took a major step towards a 21st Century energy policy.  Let’s hope the Senate follows their lead – and soon.

CSPAN has posted the full interview here.

Thorning: House Embraces a 21st Century Energy Policy

Dr. Margo Thorning, Senior Vice President and Chief Economist for the American Council for Capital Formation (ACCF), released the following statement applauding today’s passage by the House of Representatives of legislation lifting the ban on U.S. crude oil exports:

“Today’s historic action by the House of Representatives is recognition the United States must embrace a 21st century energy policy that reflects the reality of our position as the world’s leading producer of oil and natural gas. Over the nation’s history, our policies – from tax to education to health care – have evolved as the world and circumstances have changed. Why shouldn’t our energy policies also evolve? The White House’s veto threat is disappointing; especially amidst its simultaneous acknowledgment that domestic oil production growth has strengthened the nation’s economy, supported new jobs and enhanced our energy security. The Senate now has a choice:  expand on that success by giving the U.S. the ability to become a global energy leader or stay mired in the energy past.”

White House and Energy Secretary Ignore Facts on Crude Oil Exports

The U.S. House of Representatives is poised to pass legislation tomorrow removing the outdated policy ban on crude oil exports. Failing to acknowledge the facts, the White House announced a veto threat on H.R. 702, the bill under consideration by the House.  However, the longer the ban remains in place the longer Americans are unable to utilize the benefits of crude oil exports.

Earlier this week at a Senate Energy and Natural Resources Committee hearing, Energy Secretary Ernest Moniz defended the White House’s decision to oppose the House crude oil exports bill. He argued lifting the ban would make little sense because we are still importing 7 million barrels of oil per day, more than we could export. What Moniz fails to mention is the domestic supply glut that is occurring in our industry as a result of the ban. A USA Today editorial links the glut to “a mismatch between the type of oil being produced and the type of oil that domestic refiners are designed to process.” And because the U.S. cannot export our domestic oil, havoc is being wreaked on the industry resulting in countless job losses and economic downturn.

The USA Today editorial also noted how “one supposed upside of the ban — lower gasoline prices for U.S. consumers — is not all it’s cracked up to be.” The editors are correct as a study by the Department of Energy found that lifting the ban on crude oil exports will result in petroleum products, including gasoline, to either remain unchanged or slightly reduce in price.

It’s disappointing that the White House and Secretary Moniz are unsupportive of a policy change that will bring such significant economic rewards to the nation as a whole and to Americans from coast to coast.  With sluggish job growth and a still-struggling economy, we are desperately in need of an economic boost.  And the answer is right in front of us: removing the restrictions on crude oil exports.  The House clearly sees that; let’s hope the Senate does as well.

Foreign Policy and the Effect of Crude

The message to lift the ban on crude oil exports has finally reached Congress. The House will vote tomorrow on legislation that would overhaul an energy policy put in place more than forty years ago that bans crude oil exports. As the debate on crude oil exports continues, it’s important to assess the facts. Proposed legislation to end the ban would bring positive, over-arching benefits to the United States including an increased GDP, more American jobs, and an improved trade deficit. In addition, it would strengthen our national security and solidify America’s position as a leader in today’s global energy market.

In the past decade, America has experienced an energy boom that has catalyzed energy sector growth like never before. By allowing crude oil exports from the United States, the global energy market in which we and others participate would become diversified, allowing many of our strategic foreign allies to shift their focus away from unstable oil producers such as Russia and the Middle East.

Denying our energy resources to the rest of the world makes it harder for the U.S. to dictate a global free trade policy. By opening our energy markets, the U.S. will become a stronger leader in free trade and democracy, strengthening trade partnerships with regions across the global.

As Congressional votes are cast, lawmakers should recognize the significant national security implications of this proposal, in addition to the evident economic benefits. Now is the time to lift the ban on crude oil exports; now is the time to prove America is the world leader in energy.

See below to read more on foreign policy and crude oil:

  • The Tennessean, 10/5/15, “After Iran deal, why US must end crude oil export ban” by Margo Thorning
  • Reuters, 10/6/15, “Why lifting oil export ban can help U.S. foreign policy” by Emma Ashford