The People of America's Oil and Natural Gas Indusry

O’Reilly - Oh So Wrong On Exports

Kyle Isakower

Kyle Isakower
Posted February 23, 2012

Bill O’Reilly was beating the drum again last night about oil exports, once again displaying his lack of rhythm.  Here are his arguments in a nutshell:

Many Republicans want to drill baby drill but what's the point if all the oil goes to China?...You are not making as much money in U.S.A. as you could in China so you are just whipping it out and throwing it over to China. Is that right or wrong?... And we own 12 miles of ocean offshore. That's the U.S. sphere of influence. We own that; it's ours. All the 320 million American citizens. The government doesn't own it. The oil companies don't own it. So they take the stuff out of our land, and they send it to China. Does that make sense to you?

First let’s go back to this chart:

That’s right in 2011 99.7 percent of the crude oil produced or imported into the U.S. was processed here.  We simply do not export crude oil in any significant way.  We do export products manufactured from crude oil, including motor gasoline.  Let’s have a look at that from both the supply and demand side:

Now this might be hard to see because gas exported is quite small compared to gas supplied to U.S. consumers, but where you see spikes in exports corresponds almost exactly to dips in U.S. demand.  In other words the gas we are exporting is not gas taken from U.S. consumers, but rather gas that U.S. consumers aren’t using.  As explained yesterday, this is a good thing.  Having an export market ensures that refiners can operate efficiently and maintain U.S. refining capacity. Contributing both to energy security and keeping our workers working.

There has been a lot of talk recently about the need to boost American manufacturing, well this is what manufacturing looks like.  Taking raw materials and adding economic value to them. In the case of exported petroleum products, the U.S. produces or buys crude oil, refines it at U.S. refineries and then sells finished petroleum products at significantly higher value.   Exporting petroleum products does not increase prices, as John Felmy put it:

…when supplies are available to export – as they are today because of weak U.S. demand – they put downward pressure on the prices of the gasoline and other products we import. Exports also mean jobs for Americans, including good paying U.S. refinery jobs, and a lower trade deficit.  but reducing the supply of the crude oil does.

If O’Reilly really wants to contribute to the gas price debate he should focus on real solutions, not free trade bogeymen.  Back to Felmy for what these solutions look like:

The industry must be allowed to develop at home more of its ample crude oil and natural gas resources. More U.S. barrels on crude markets would help drive down crude costs and reduce gasoline prices. We need policies that ease access to U.S. oil and natural gas resources, which are still very ample. We also need policies that add critical infrastructure, such as building the Keystone XL pipeline, to bring in more of Canada’s vast supplies of oil, and policies that keep regulations and tax policy reasonable.

ABOUT THE AUTHOR

Kyle Isakower is vice president of regulatory and economic policy at the American Petroleum Institute. With 26 years experience, he is the go-to guy for issues regarding energy and environmental policy and oversees the development of API standards and economic analyses. In his past lives, Kyle has worked on issues related to waste management and remediation, NAAQS and air toxics—and led efforts promote the industry's energy efficiency efforts. Transplanted to Washington from north Jersey over 20 years ago, he remains faithful to the New York Giants, and works diligently to ensure his wife and two children do so as well.