America’s boom in shale oil and gas has given us a new tool to counter aggressive nations without firing a shot. That tool is energy abundance. With increased production and new techniques of extracting energy from shale, it’s time to break free from outdated shackles on U.S. crude oil exports.
In the 1970s, we were hogtied by energy scarcity. The U.S. suffered a devastating oil embargo during the mid-1970s courtesy of the Organization of Arab Petroleum Exporting Countries (OAPEC), and at the end of the six-month embargo, oil prices had quadrupled from $3 a barrel to nearly $12. Our country’s economy was crippled, and we faced the prospect of “stagflation” and wage and price controls.
By December 1975, President Gerald Ford signed the Energy Policy and Conservation Act (EPCA), a ban on most U.S. energy exports that remains in place today. At the time, export bans made sense; they preserved the resources we did have.
That was then, this is now.
Today, the ban is hurting our economy and global competitiveness. Lifting the crude export ban would tilt global markets, benefit the American consumer and bolster the US economy, restoring the US to the status of energy superpower. Even more, crude from the US would either stabilize or lower oil and gasoline prices and would reduce international dependence on volatile petro states like Russia and OPEC countries – mega-suppliers that have used energy historically, and very recently, as a geopolitical chess piece.
Tilting global markets
Consider how remarkable the U.S. energy turnaround has been and what it could do for world energy trade. In 2013, for the first time since 1996, the U.S. produced more oil than it imported. In 2014, the Department of Energy projects oil production to exceed 8.5 million barrels per day, the highest output since 1986.
Further, the advent of shale hydraulic fracturing, or “fracking”, combined with conventional and offshore production, allowed our country to become the world’s top energy producer this year, surpassing even Saudi Arabia and Russia.
What does this mean for us? First, we’ve drastically reduced petroleum imports from politically volatile suppliers in the Middle East. The U.S. is actually projected to become a net energy exporter – given changes in our trade regulations – as early as 2018, according to the BP World Outlook energy survey.
Lifting the crude oil ban would allow the United States to gain a significantly stronger trade position with international partners. It will show a clear commitment to the global commodities marketplace and help vulnerable neighbors in Eastern Europe and elsewhere find alternate routes of supply. At present, America sends a terrible signal to the global community when we complain about other countries’ export bans – witness China’s ban on rare earth exports – and then refuse to alter our own trading restrictions.
Boon for American consumers
The brisk international energy trade that will accompany lifting the crude oil export ban will also boost the US economy and benefit consumers. Not only is our energy boom creating jobs – shale discovery alone now employs 1.7 million Americans, and states like Pennsylvania and North Dakota are seeing employment rates skyrocket – crude exports will cause gasoline prices to drop 2.3 to 7 cents a gallon on average, according to recent studies. For example, an ICF International study (commissioned by the American Petroleum Institute) projects that crude exports will raise US GDP by $38 billion and save American consumers $5.8 billion over a 20-year period. Our balance of trade deficit – half of which has been paid historically for energy imports – could turn into a resounding surplus.
What happens if we do nothing? First, our allies in Europe, who have been lobbying for changes in U.S. energy export rules, will continue to be at the mercy of unpredictable monopoly suppliers. Our own burgeoning shale-based petroleum industry will slow down or stop altogether. Jobs, geopolitical leverage, even improvements in US refineries, will be lost, placing America back into the “energy dependent” column.
If, on the other hand, America wants to remain an energy superpower, we must leverage our oil and gas abundance for greater good. Lifting the export ban will help stabilize sister economies and improve our own. It will actively counterbalance energy-aggressive supplier states like Russia and Iran, and discourage them from using price hikes and embargoes as a geopolitical weapon.
The timing is right. Mr. President and Congress, lift the ban on crude oil exports now. Energy trade is a key to our national survival.
Eberhart is CEO of Denver-based Canary LLC, one of the largest privately owned oilfield service companies in North America. He is a member of the Colorado Oil & Gas Association and The Los Angeles World Affairs Council.