7 million reasons to keep US oil at home

Until the US figures out how to get along without the millions of barrels of oil it imports each day, oil exports will only increase our dependence on foreign oil, Cobb writes.

|
Orlin Wagner/AP/File
In this Feb. 21, 2012, file photo, oil field workers drill into the Gypsum Hills near Medicine Lodge, Kan., using a technique known as hydraulic fracturing, or "fracking", to coax out oil and gas.

They say that the first casualty of war is truth. And, on both sides of the fight over lifting the ban on exports of U.S. crude oil, the truth has already fallen into a coma. The ban was instituted in 1975 in order to make America less subject to swings in international oil supply after suffering the price shock associated with the Arab oil embargo in 1973.

Last week a committee in the U.S. House of Representatives voted to end the ban after a Senate committee voted in July to do the same. A vote by the full House and Senate could be near.

The proponents are careful NOT to say that the United States is energy-independent and so has oil to spare. Such claims made in the past backfired because it is too easy to look this up. Net U.S. imports of crude oil were almost 7 million barrels per day (mbpd) in the week ending September 4. That's out of about 15.6 mbpd of liquid fuels consumed domestically.*

Yet, it is this state of affairs that the proponents of lifting the export ban label as "abundance." Here's the relevant quote from the website of the Domestic Energy Producers Alliance (DEPA), a consortium of U.S. oil drillers: "Thanks to the genius of America's independent oil and natural gas producers, the world is moving from a concept of 'resource scarcity' toward 'resource abundance.'" (So, the world is not moving toward actualabundance, just the concept of abundance. But, I'm nitpicking.)

In another piece entitled "From Scarcity To Abundance: Why The Strategic Petroleum Reserve Is Unnecessary" the group is more bold, saying that the supposed "abundance" is right here in the United States:

US crude oil production has nearly doubled since 2008, rising from 5.0 million barrels per day (MMB/D) to 9.5 MMB/D today. These domestic supply gains are a direct result of technological breakthroughs in horizontal drilling and advanced well completion techniques. Over the same period, improved energy efficiency has reduced US demand growth. These combined factors have fueled a paradigm shift in our country from energy “scarcity” to energy “abundance.” (my emphasis)

The site also includes a graph deceptively labeled "U.S. Crude Oil Production Potential" showing what looks like a rise in production to 20 mbpd by 2025. DEPA can always claim that that graph just represents estimates by its backers. The graph, however, stands in stark contrast to the latest "Short-Term Energy Outlook" just released by the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy.

 

Even the ever-optimistic EIA forecasts that U.S. crude oil production will fall next year by 400,000 barrels per day to 8.8 mbpd. In fact, its figures show that crude production actually already began its decline in April. Of course, this decline is partly a response to low oil prices as U.S. oil companies have dramatically reduced their drilling from 1,592 active rigs one year ago to 652 for the week ending September 11.

The central declaration on the DEPA site is as follows:

We must allow crude oil exports to develop America's resource potential. Developing America's resources decreases our dependence on foreign oil.

This comes even as we are told that U.S. oil production has nearly doubled since 2008 WITHOUT lifting the export ban. So, if sentence one has no basis, then it has no bearing on sentence two.

Now, if 1) the United States doesn't produce more oil than it needs, but rather remains the world's largest importer next to China and 2) the export ban didn't prevent domestic production from doubling, then what is the push to end the export ban all about? In a word, money.

There is not enough U.S. refining capacity for all the so-called light tight oil produced from U.S. deep shale formations which have been the mainstay for domestic oil production growth. That means that refineries that can use this type of oil are paying less (because of the excess supply) than they would if foreign refineries could also bid on the oil--which, of course, they can't because of the export ban.

Lifting the export ban would allow domestic oil producers of light tight oil to sell their output to foreign refineries at a higher price than they currently get from domestic refineries. But given the now ongoing decline in U.S. oil production, selling that oil to foreign refineries would mean that the United States would have to import more of other heavier oils (for which we have adequate refinery capacity) to make up for the light oil that is exiting the country. Thus, the United States would become MORE dependent on foreign oil if we lift the export ban.

The oil companies make the case that their product is discriminated against. Agricultural products, manufactured goods and even coal face no export restrictions. Why should oil be singled out?

There is debate about whether allowing essentially a "swap" of U.S. light oil for heavier foreign oil would raise the price of petroleum products such as gasoline, diesel fuel, heating oil and jet fuel in the United States.

What this move would surely do is force more U.S. refiners to pay higher prices for their oil inputs since they would have to compete against bidders across the globe.

The opponents of lifting the ban, not surprisingly, include U.S. refiners. Also included are consumer groups and petrochemical firms, firms which use oil as their feedstock.

These poorly funded opponents claim that lifting the ban would squander America's chance to be energy-independent. But given the yawning gap between the petroleum products it consumes and the oil the country is able to produce, it is highly unlikely that the United States will ever become energy-independent.

(It is important to note that the United States has long been self-sufficient in coal, and so far this year has imported only about 10 percent of its natural gas needs, almost all of it from Canada, our longtime major supplier. So, energy independence is really a codeword for oil independence. No mention is generally made of trying to become energy-independent by actually REDUCING energy use through conservation and efficiency--though there is occasional lip service given to the idea of reducing the GROWTH in energy demand.)

Whether the U.S. Congress will vote to lift the export ban just as members are about to go into an election year is an open question. But even if the Republican-controlled Congress does vote to lift the ban, the Obama administration has signaled it will likely veto such a measure. This is despite the fact that last year the administration widened the definition of what is permissible to export beyond refined products which have long been legal to export. The administration moved to include condensate which is essentially ultra-light oil that starts as a gas under the tremendous pressures inside oil reservoirs and then condenses to a liquid once it reaches the wellhead.

Politically, however, it makes sense for President Obama to oppose any bill lifting the ban in order to rally traditional Democratic groups such as labor and environmentalists for next year's elections.

But, if the ban were to be lifted and that resulted in higher fuel prices for Americans, it might be a good thing in the eyes of those who want Americans to use less oil and to adopt renewable alternatives. Those renewables would, of course, become more competitive as a result of higher oil prices.

Still, until the country figures out how to get along without the millions of barrels of oil it imports each day, oil exports will only increase our dependence on foreign oil--which will have to be shipped in to replace the oil that would now be exported. This might lead to increased efficiencies in the oil industry as each type of crude would more easily reach the refineries best suited to refine it. But it's hard to see how oil exports would make the United States more energy secure. And, that was the reason behind banning those exports in the first place.

__________________________________________

*U.S. refineries actually produce close to 20 mbpd of liquid fuels, some one-quarter of which is exported as gasoline, diesel and other fuels and chemical feedstocks. We have far more refining capacity than we currently need for domestic consumption and so turn some of our imported and domestic crude oil into refined products bound for other countries.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to 7 million reasons to keep US oil at home
Read this article in
https://www.csmonitor.com/Environment/Energy-Voices/2015/0918/7-million-reasons-to-keep-US-oil-at-home
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe