With US oil and natural gas production surging, everyone seems to be wondering: What can all this oil and gas do for me?
For Gov. Bobby Jindal (R) of Louisiana, the boom just might help him get to the White House – or at least take the current administration down a notch.
Mr. Jindal went on the offensive Tuesday, lambasting the Obama administration for not doing enough to harness a US energy boom that is reshaping the country’s economy and environment. Jindal said he will decide on a 2016 presidential run after November's midterm elections.
“Right now we have policies in the way of our taking advantage of these energy resources," Jindal said at a Monitor-hosted breakfast Tuesday. "The reality is right now we've got an administration, the Obama administration, that are science deniers when it comes to harnessing America's energy resources and potential to create good paying jobs."
Jindal is not alone, with a diverse chorus of constituencies hoping to capitalize on the country’s new-found resource abundance. Motorists want relief at the pump, with gas prices stubbornly high. Some climate advocates want natural gas to replace dirtier-burning coal (although others are not convinced there’s a net positive climate impact of such a switch). The oil industry wants to lift the crude export ban to maximize profits. Lawmakers hope to leverage US oil and gas wealth as strategic tools to counter Russia and ISIS. Indeed, during Tuesday’s breakfast, Jindal touted a new 47-page report titled “Organizing Around Abundance: Making America an Energy Superpower.”
It’s all because fracked, horizontally-drilled American wells are beating expectations and propelling US production into the ranks of Russia and Saudi Arabia. Domestic production is particularly exceptional relative to the rest of the world, which hasn’t undertaken the same unconventional drilling as the US.
And the US boom shows scant sign of slowing, encouraging observers to dream big about oil’s potential. “The United States is expected to provide nine out of every ten barrels of new global oil supplies in 2015,” says Adam Sieminski, head of the Energy Information Administration (EIA), in EIA’s Short-Term Energy Outlook for September. Production per well in parts of Texas has doubled since 2012, according to the Wall Street Journal, despite the fact that the rig count there has been flat.
What’s a country to do with that kind of energy windfall? Which policies will maximize the benefit both at home and abroad? An increasing number of industry watchers – including Jindal – say the first step is to open the spigot.
“We believe if we lifted the ban we would see overall petroleum prices fall, we’d see heating oil prices drop, aviation fuel prices drop,” says Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, a Washington-based think tank.
Republicans like Jindal have agitated for the US to loosen restrictions on oil exports and expand drilling to bolster the boom.
Lifting the decades-old ban on oil exports would strengthen the US economy – boosting GDP between $600 billion and $1.8 trillion through 2039, according to a report authored by Mr. Ebinger and released last week.
The boom has had unquestionable benefits for Americans at home already, creating jobs in Texas and North Dakota oil patches and cushioning the US from oil shocks – even as unrest roils Iraq, Libya, and Ukraine.
“It’s had a dramatic impact,” Ebinger says. “There’s been very dramatic employment benefits. We’ve certainly seen a drop in our net imports, so that’s had a positive impact on the balance of trade.”
But many are dreaming beyond American borders, and banking on US energy wealth to counter oil- and gas-rich adversaries abroad.
Andy Karsner, CEO of Manifest Energy, told the New York Times’ Thomas Friedman last week that lifting the long-standing oil exports ban would help the US counter threats posed by an aggressive Russia and a metastasizing Islamic State (IS) in the Middle East.
The US is generating record quantities of oil and gas, and Karsner panned the US government for sitting on its hands instead of shipping some of the wealth abroad.
“It’s as if we own the world’s biggest bank vault but misplaced the key,” Karsner said. “Let’s lift that export ban and have America shaping the market price in our own interest.”
But even Ebinger, who suggests lifting the ban, questions how much of an impact it could have on ISIS and Russia.
“I don’t think it’s going to affect ISIS, and I don’t think it’s going to affect Russia dramatically,” says Ebinger. “It’s not going to be transformative or put much pressure on them.”
That's because international oil markets are incredibly complicated, says Deborah Gordon, director of the energy and climate program at the Carnegie Endowment for International Peace, a Washington-based think tank.
“We don’t have much control,” Ms. Gordon says, over what happens in oil markets. “It’s a little fanciful to think light, tight oil in the Bakken will transform the world.”
Gordon pointed to Chinese demand as a more commanding determinant than changes in US policy. “The economic situation is the biggest issue,” Gordon says.
Environmental concerns should also play a role in planning policy around the boom, Gordon says, noting that the Brookings study says hardly anything about the environmental implications of the US shale revolution.
While the natural gas that comes from US shale is cleaner-burning than coal, gas remains a fossil fuel that contributes to global warming. Drilling and transporting the gas also raises the risk of leaking methane – a far more potent, albeit shorter-lived greenhouse gas than carbon dioxide.
Fracking “won’t help moderate climate change,” Wenonah Hauter, executive director of the environmental group Food & Water Watch, wrote Tuesday in a blog accompanying a new report on risks associated with the energy production technique. Instead, “it has the potential to unleash massive amounts of methane that will worsen the climate disaster.”
Still, US oil has cushioned US consumers from price shocks in oil and gasoline. In fact, the US boom may save the world economy $5 billion per day, according to Quartz, by lowering oil prices globally.
“It’s had a dramatic impact,” Ebinger adds. “There’s been very dramatic employment benefits. We’ve certainly seen a drop in our net imports, so that’s had a positive impact on the balance of trade.”
And lifting the ban on exports could help prolong the oil boom, helping sustain the profitability of unconventional drilling and creating more American jobs in exploration, production, and transport of oil and gas.