Posted August 11, 2015
The U.S. Commerce Department’s recent mid-year trade report illustrates how surging domestic oil and natural gas production is helping our economy – and strongly suggests what increased domestic output could do if U.S. crude oil and liquefied natural gas (LNG) had unhindered access to global markets.
According to Commerce, the U.S. trade deficit among petroleum and petroleum products fell 56.1 percent the first six months of this year compared to the first six months of 2014 (exhibit 9). That growth helped hold the total U.S. year-over-year trade balance steady, even as the trade deficit in non-petroleum products increased 23.1 percent. API Chief Economist John Felmy:
“Despite a very competitive global market, the U.S. energy revolution continues to push our trade balance in a positive direction. Oil imports remain on the decline, and strong exports of petroleum and refined products are creating new opportunities for America to bring wealth and jobs back to U.S. shores.”
For that trend to continue, though, the United States must pursue energy trading opportunities with the same vigor it pursues trade in other areas. A 1970s-era ban on crude oil exports should be lifted, and LNG export projects should be approved by the government so that domestic producers have every chance to access global markets. In both cases, market- and demand-driven exports would stimulate domestic production, job creation and economic growth, according to a number of studies – all to the benefit of America and American consumers.
The status quo – self-sanctioning crude oil production and unnecessarily hindering entrepreneurs’ efforts to position the U.S. as a major player in the developing global LNG market – could threaten future domestic energy output, limit growth and squander America’s energy potential. Felmy:
“Outdated trade policies are among the biggest threats to America’s continued growth right now. Accelerating approval of LNG export terminals and lifting the 1970s-era ban on crude oil exports would put America in the driver’s seat on trade. America is now the world’s largest producer of natural gas, providing our workers an important competitive advantage in the global market. And study after study shows that lifting the ban on crude exports will mean more jobs, downward pressure on fuel costs, and could reduce the power that foreign suppliers have over our allies overseas.”
The time is at hand. Legislation is moving through Congress to lift the crude oil export ban. That’s good, because there’s an urgency to the export issue. A new World Bank analysis points to clear impacts if economic sanctions against Iran are lifted and Iranian oil exports are allowed to return to the marketplace. The United States should not harm its own global competitiveness – even as it advances another country’s oil export interests, denying benefits to Americans while they accrue to others. API President and CEO Jack Gerard, in remarks last month:
“American voters understand that lifting the ban on Iranian oil resources, while maintaining a ban on U.S. companies, is illogical and restricts our own competitiveness. It doesn’t make sense. U.S. energy producers should not be placed at a competitive disadvantage to anyone, whether it is Russia, Iran or any oil producing country. This outdated crude exports policy must be repealed to level the playing field and allow the U.S. to flourish as a global energy superpower.”
In addition to positive macro-economic impacts from crude exports – up to $70.2 billion in additional investment in exploration, development and production by 2020 and between $200 billion and $1.8 trillion added to the economy between now and 2039 – growth would occur in the vast energy supply chain. An IHS study earlier this year estimated that lifting the export ban could add $26 billion to $47 billion to the GDP from 2016-2030 and support up to 1 million jobs through industry-associated activity depicted in this graphic:
The economic benefits of oil and gas activity throughout this extensive supply chain far exceed benefits to the industry itself. Every new production job creates three jobs in the supply chain and another six jobs in the broader economy. Contributions to Gross Domestic Product (GDP) also multiply: every dollar of GDP created in the oil and gas sector generates two dollars in the supply chain.
In both cases – allowing crude oil exports and facilitating LNG exports – there’s a direct connection to capitalizing on the U.S. energy revolution. Both are important facets in an overall, pro-development approach that would sustain and grow the revolution, supplying broad benefits to the economy and individual Americans while also stabilizing global energy markets and helping our friends abroad – all of which will make the United States more secure in terms of energy and in the world.
ABOUT THE AUTHOR
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.