President Barack Obama opened the door to exporting U.S. oil and natural gas; the Trump administration is likely to drive a tanker through it.
As part of the $1.1 trillion spending bill that passed in December 2015, Obama agreed to end the 40-year ban on U.S. crude oil exports. The president opposed the repeal, but the bill also extended the wind and solar energy tax credits, so he took the compromise.
In addition, the U.S. Department of Energy has finally begun approving construction of terminals to export U.S. liquefied natural gas (LNG) — 10 so far (in Texas, Louisiana, Maryland and Georgia) with most of them still under construction. When completed, we should see natural gas production and export increase exponentially.
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.
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 estimated shortly before the presidential election that 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.
Given the incoming Trump administration’s embrace of fossil fuel production — and given the individuals nominated to run the Environmental Protection Agency and the Department of Energy — those Forbes estimates are likely on the low side.
The nascent energy export industry is important for several reasons.
First, 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.
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.
Finally, exporting crude oil and natural gas will jump start 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. Ironically, Obama has fought that boom every step of the way, even as he repeatedly took credit for it when elections were approaching.
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.
Merrill Matthews, Ph.D., is a resident scholar with the Institute for Policy Innovation in Irving.
This piece also appeared in the Queen Creak Indepedent (Jan. 16, 2017) and the Dorchester Banner (Feb. 17, 2017).