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Two Compelling Charts Show Why It’s Time to End Crude Export Ban

Today’s Wall Street Journal article by Amy Harder states: “Big voices in the oil industry and Congress now support a move that would have been unthinkable not long ago: opening the U.S. oil industry to exports.”

The reasons couldn’t be clearer.  Seven years after the end of the recession, U.S. investment remains sluggish:

Screen Shot 2015-08-10 at 5.24.12 PMGross nonresidential fixed investment is only 8 percent above it’s pre-recession level. In addition, investment as a percent of cash flow remains a record low levels, see:

ACCF chart on Investment as of July 2015


Lifting the ban on crude oil exports from the U.S. would help boost investment and job growth.

ICYMI: CRS memo asks wrong questions on crude exports and Eastern Europe

CRS has published a memo (May 29, 2015) on oil exports demonstrating the principle that if you ask the wrong question, you may not get the most helpful answer.  The CRS memo looks at ability of Eastern Europe to absorb US crude oil, if policy did not prohibit this.  But the real question is how might Eastern Europe be impacted if US oil exports are allowed – after all, there is a global market for oil so it may not matter WHERE the US oil is actually consumed.  Instead, the impacts for Europe could be transmitted through the global market for oil.

While the CRS memo acknowledges that lifting the ban on U.S. crude oil exports would tend to reduce the global price of oil, it seems to overlook the potential beneficial impact on Eastern European countries and refiners. CRS notes that there are various reasons why lifting the U.S. crude oil ban may not result in sales to Eastern European refiners including the fact that their refineries may not be well suited to process U.S. light sweet crude and lack of infrastructure to get it to them. However, CRS seems unclear about the fact that if U.S. crude oil is exported anywhere in the world it would tend to put downward pressure on the Brent price and also the discounted price that Russia gets for its oil. A lower global crude oil price would benefit Eastern European countries as well as those in Western Europe; this point could have been given more emphasis in the CRS report. In addition, our recent experience with   potential LNG exports from the U.S. has impacted Russian-European contract prices for LNG. There have been quite a few news items about European firms getting favorable deals even though we are not yet exporting much. The current trend in U.S. crude production is already putting downward pressure on global prices (for examples see the first reason mentioned for lower prices on page 156 here).

Once we start exporting crude, that will also mean more production .It does not matter whose market share we are taking away. All importers should benefit. From a geopolitical perspective, it seems that U.S. policy makers would think that decreased Russian oil revenues would be a useful outcome.

The CRS memo also notes that ´If U.S. crude oil export restrictions were removed, there is no way to accurately predict the actual level of exports that would occur”.   Is this a criticism of lifting the ban?   CRS goes on to say, “ If the level of U.S. exports is small relative to the market, it might be difficult to isolate these price effects amid the normal volatility of oil prices.”  Again, what is CRS’s point?  Are they suggesting that it’s critical to understand exactly what the price impact of lifting the ban would be? That seems unrealistic and unnecessary. The important thing is to embrace the principle of free trade and let markets sort out the price impacts. Lifting the ban would provide substantial economic benefits to the U.S. A study released last month by the ACCF summarizes several analyses of the economic impacts on the U.S. of lifting the ban; all show positive impacts on GDP and U.S. job growth.


Radio America: My interview on crude exports

Newsmax TV: My Interview on LNG Exports

New Study Says Oil Exports Would Be a ‘Win, Win’ for U.S. Economy and National Security

Lifting the restrictions on U.S. crude oil exports would lead to further increases in domestic oil production, result in lower gasoline prices and support millions of additional jobs, according to a comprehensive new study commissioned by the Energy Security Initiative (ESI) at Brookings in coordination with a macroeconomic study contracted from National Economic Research Associates (NERA) Economic Consulting.

The production boom from shale plays across the country, such as North Dakota and Texas, have sparked serious debate on what we should do with our new energy reality of abundant crude oil supply. To shed light on how our Administration should move forward with this new abundant energy source, the ESI partnered with the National Economic Research Associates (NERA) to examine the economic and national security impacts of lifting the ban on crude oil exports. And their findings were clear: it is time to match our policies to our current energy landscape.

Economically, the study found that lifting the ban on crude oil exports from the United States will boost economic growth, wages, employment, trade and overall welfare. Each scenario used in the study model – delaying lifting the ban until 2015, lifting the ban only on condensates or lifting the ban entirely – showed that our GDP was positively affected. Specifically, cumulative GDP increases through 2039 ranged between $600 billion and $1.8 trillion, depending on how soon and how completely the ban is lifted. Additionally, employment impacts – economy wide – are estimated to be positive as well. The study found that lifting the ban entirely by 2015 reduces unemployment at an average annual reduction of 200,000 from 2015 – 2020.

For consumers, the study also found that lifting the ban would actually lower gasoline prices. In the reference case, the decrease in gasoline price is estimated to be $0.09 per gallon in 2015. If oil supplies are more abundant than currently expected, the decline in gasoline prices will be larger ($0.07 to $0.12 per gallon) and will continue throughout the model horizon (2015 – 2035).

Finally, ESI found that not only would lifting the ban help the U.S. economy and consumers, but also strengthen U.S. foreign policy and energy security. According to the ESI reports authors, Charles K. Ebinger and Heather Greenley, “allowing crude oil exports will increase revenues to domestic producers helping to maximize the scope of the production boom, boosting American economic power that undergirds U.S. national power and global influence.”

Furthermore, during a report rollout held yesterday at Brookings, Dr. Larry Summers, former director of the National Economic Council for the Obama Administration, encouraged President Obama to use his executive authority to lift the ban on crude oil exports stating that the export ban “goes against U.S. principles of free trade” and lifting the ban, “is the right thing to do.”

National Journal: How Should Climate Change Be Taught?

This weeks’ topic on National Journal’s Energy Insiders: How Should Climate Change Be Taught?

The battle over climate science in schools is heating up.

Earlier this month, a coalition of national science-education advocates released a students bill of rights asserting that students across the country should be taught the scientific consensus on climate change. The consensus view held by 97 percent of scientists, according to reviews of the academic literature, holds that the planet is heating up and human activity is the primary cause.

Currently, however, a patchwork of state science standards exist that do not mandate the consensus view is taught, leaving the door open for controversy over climate change to get equal airtime in many classrooms.

My response:

States should decide how best to teach issues like climate change and climate change policies.

Like any important issue–evolution vs creationism, national defense and health care policy–it is critical that students understand all sides of the debate. It was an honor for me to help present an economic perspective on the climate change debate to a group of middle school students in Atlanta, Georgia. See more about this at….

For instance, it’s important for students to understand that climate change is a global problem and that developing counties like China are responsible for most of the growth in GHG emissions. Without their participation, nothing the developed countries do to reduce their own GHGs will make much difference, see Figure 3 in…

Students also need to understand that cost/benefit analysis should be used to evaluate government policies to reduce GHGs emission growth in the U.S. For example, the regulation of GHGs by the U.S. Environmental Protection Agency should be subject to peer review. EPA’s analysis of the costs and benefits of the 1990 Clean Air Act Amendments was seriously flawed. See…

Last, renewable energy costs substantially more than that produced by conventional fossil fuel or by nuclear power and states with renewable portfolio standards have significantly higher electricity costs than other states, see Table 3 and Figure 2 in…

Today’s students are tomorrow’s leaders, so it is imperative that they understand the full picture of issues like climate change and the solutions to address it. When armed with the facts, rather than one-sided rhetoric, our youth of today are smart enough to make their own conclusions.

Act On LNG Video Release

Today, ACCF is releasing a new video – narrated by the Honorable Harold Ford, Jr. (D-TN) – telling the story of the Main Street benefits available to the United States through the export of liquefied natural gas.

The U.S. energy reality has changed drastically of late, driven by game-changing advances in the production of natural gas from shale. Annual production ofnatural gas and oil from shale has grown by more than 50 percent since 2007, helping the United States to assert itself as a global energy superpower. The U.S. is now the world’s leading producer of natural gas, and the domestic and geopolitical implications of this feat are tremendous.

LNG01The U.S. is now producing more natural gas than any other nation – recently overtaking the former global leader, Russia. And global production dynamics demonstrate that this is not an isolated or temporary condition. In 2014, conservative estimates from the Energy Information Administration (EIA) project that the U.S. will produce approximately 24 trillion cubic feet of natural gas and that Russia is on a downward slope at closer to 21 trillion cubic feet of natural gas.

The United States has the capability and ingenuity to produce at even greater levels and to reap even greater economic benefit. But until energy and trade policies in Washington are revised to reflect the new energy reality and our new role as a global leader, we risk leaving much on the table.

Legislation supported by both Republicans and Democrats – H.R.6 and S.2083 – would increase the benefits Americans receive from our vast resources, encouraging greater production at home and better enabling us to capitalize on the geopolitical power of our ample domestic energy. Given extensive debate and a clear and growing body of favorable research on the topic of LNG exports, both of these bills deserve urgent, strong, and bipartisan support.

LNG02Reserves: According to the EIA, in 2012 the U.S. consumed approximately 25 trillion cubic feet of natural gas while our proven reserves are estimated at at 334 trillion cubic feet.

We have sufficient capacity to export LNG while satisfying our domestic needs – and the more our businesses invest in this burgeoning sector, the more reserves are uncovered and greater production is achieved. What’s more, exporting our excess supply of natural gas would enable us to bolster our international allies by delivering needed energy and diversifying their sources – yielding direct benefits to American national security.

The 50% annual increase in U.S. shale oil and gas production noted by McKinsey Global Institute’s report, “Game Changers,” is evidence of what is possible in a new American energy reality. And the economic benefits of this boom are unmistakable.

LNG03Economic Development: This shale gas revolution is revitalizing the heart of small town America, already supporting 1.7 million jobs, according to a study by IHS Global Insight. Those numbers grow to 3.5 million in the next twenty years.

These jobs reach far beyond traditional “oil states,” and far beyond the wellhead. A recent McClatchy piece titled “Energy boom feeds other business, too,” published in the Kansas City Star, examines the way that the boom has energized Main Street. The piece notes: “A rust-bucket town near Buffalo is a perfect example of the transformation that fracking has brought to American business, where new life has been breathed into manufacturing and the nation’s railroads, even as much the economy bumps along at a subpar pace.” The article goes on to note how Kansas businesses are finding economic benefits from natural gas production in other states. States like Ohio, Arkansas, Pennsylvania, and countless others are at the heart of the boom.

Economic Benefits: According to study commissioned by the Department of Energy and conducted by NERA Consulting, the U.S. would experience net economic benefits from increased LNG exports. In fact, the report notes, “for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased.” The academic and economic case for exports is abundantly clear.

Organizations like the National Association of Waterfront Employers and Associated General Contractors of America are coming out in favor of H.R.6 and S.2083 because the thousands of members they represent throughout the United States benefit from increased energy production here at home.

Conclusion: The U.S. economic recovery – built on a rebirth of industries, job creation, leveling the trade balance, and regaining our global standing – is at our fingertips. As former Representative Harold Ford Jr. says in our newly released video: “Shale oil and gas development is a game changer. The U.S. is an energy power player, and we have to work hard to make sure it stays that way, because there is a lot at stake.”

If we are unable to move beyond the current status quo characterized by years-long delay and failure to act, the progress and benefits available through our vast energy resources will be stifled. It is important that our energy infrastructure is improved now in order to continue development and keep global prices competitive.

U.S. ingenuity is flourishing and unlocking new economic realities; we need bipartisan policy decisions to allow us to work hard to keep it that way. We need to Act on LNG.


New Video: Energy Exports Benefit “Main Street USA”

The American Council for Capital Formation’s (ACCF) ActOnLNG campaign has launched a new video highlighting how important liquefied natural gas (LNG) exports are to revitalizing Main Street, powering key industries, and strengthening U.S. manufacturing.  The short video, narrated by former Congressman Harold Ford, Jr. (D-Tenn), also urges the Obama administration to speed up LNG export approvals.  The video complements efforts in Congress to boost LNG exports to America’s allies through legislation, including the Domestic Prosperity and Global Freedom Act (H.R. 6).

“This video captures the sense of urgency that use needed to ensure that the United States continues to lead the world in the development of energy resources–particularly natural gas,” explained Dr. Margo Thorning, ACCF Chief Economist and Senior Vice President.  ”Exporting LNG would be a real game changer for the nation’s economy and would help America sustain its natural gas boom.  We hope this video will spark further conversation around natural gas exports–especially the need to cut through the bureaucratic red tape holding back development.”