Debate Forum: 10/06

U.S. considers dipping toes into international oil exports

‘Texas Tea’ party?

 

By Tim Walker

Photo: The broasted combination platter at Mel-O-Dee drive in

The U.S. House of Representatives has announced that they will vote this month on a bill to lift the decades-long ban on U.S. crude oil exports. Ending the ban, which was signed into law by President Gerald Ford and has been in place for nearly 40 years, is supported by Republicans and over a dozen oil companies, but is opposed by the White House, environmental groups, and by a coalition of independent refineries.

“The time has come to end the long debate over national energy policy in the United States and to put ourselves solidly on the road to energy independence…this bill is only the beginning,” said President Gerald Ford on Dec. 22, 1975, as he signed into law the Energy Policy and Conservation Act. This law effectively banned oil companies in the United States from exporting almost all crude oil, with a few exceptions, and is still in place—at least for the time being.

Coming as it did on the heels of the 1973 OPEC oil embargo and the resulting energy crisis, the point of EPCA was, and is, to insulate the U.S. from sometimes unpredictable and volatile global crude markets. Other measures included in the EPCA, like establishing the Strategic Petroleum Reserve and creating evolving fuel standards for cars and trucks, had that same goal in mind. With the country still reeling at the time from massive gas shortages and price increases caused by an Arab oil embargo—an embargo which was largely retaliation against the U.S. for supporting Israel during the 1973 Yom Kippur War—the legislation, at the time, was a popular move and went largely unopposed.

Not all petroleum exports are banned by the act—U.S. refineries have been exporting refined oil products, like gasoline and diesel, in record amounts in recent years because the ban applies only to most crude oil, not products refined from that crude. Other exemptions to the law approved by the Commerce Department include crude from Alaska’s Cook Inlet, oil passing through the Trans-Alaskan Pipeline, oil that’s shipped north for Canadian consumption, heavy oil from certain fields in California, some small trades with Mexico and some exceptions for re-exporting foreign oil. Exports of crude oil peaked at 104 million barrels of oil in 1980, but have since fallen to 43.8 million barrels in 2013.

Proponents include Former Florida governor and Republican presidential candidate Jeb Bush, hailing from the same oil-rich Bush family which produced two U.S. presidents, having unsurprisingly gone on record with his support for lifting the ban. Bush has said removing the ban, along with easing limitations on natural gas exports, would provide a boost to the nation’s economy. He is supported in these opinions by a coalition of fellow republicans which includes fellow presidential candidate Ted Cruz. The Bush campaign estimates that retail gasoline prices would drop by 6 cents a gallon within three years of lifting the ban.

Opponents include The White House and the Obama administration. While stopping short of threatening a veto, the president’s opposition could make it more difficult for supporters of lifting the ban to attract Democratic votes in Congress. White House press secretary Josh Earnest, at a meeting earlier this month, said President Obama feels that the decision should be made by the Commerce Department. For her part, front-running Democratic presidential candidate Hillary Clinton has stated through her campaign chairman that Jeb Bush’s proposals “read like a Big Oil wish list, while apparently omitting clean energy and renewables.”

Would selling oil in foreign markets be a boon or a bust to the U.S. economy? Could we be putting ourselves in a vulnerable position, possibly to face another energy crisis?

Tim Walker is 50 and a writer, DJ, and local musician. He lives with his wife and their 2 children in Dayton, where he enjoys pizza, jazz and black t-shirts. Reach him at TimWalker@DaytonCityPaper.com.

The crude argument

By Ben Tomkins 

Unsurprisingly, the call to lift the ban on the export of most crude oil is being issued directly from the group of people who would reap 99.99 percent of the benefits: oil companies. Jeb Bush is leading the charge to lift the ban, which makes an awful lot of sense since his family fills their swimming pool with crude oil, and a small cadre of other Republicans. One of them is Ted Cruz, who has never given me the impression he knows anything about anything. He just stands up in front of microphones saying things, and his face is just creepy enough that it’s hard to look away.

The arguments in favor of lifting the ban come in two forms. The first set consists of variations on how it would be good for the economy and create jobs. This is an incredibly reductionist view that is easy to sell because it uses the words “economy” and “create.” It’s sexy. However, any time a component of a major economic sector starts using those words, we should immediately get out the magnifying glass, and not because I’m a liberal and this is some convenient opportunity to belch forth some anti-capitalist screed. Personally, I love making money, so I’ve got no dog in that fight.

The reason I mention it is because there is a tremendous narrative fallacy in this country that oil companies and the oil industry are the same thing, and crude oil and gasoline may as well be interchangeable terms.

Oil companies suck oil out of the ground and shove it into barrels. That is a major, but particular, aspect of the industry as a whole that eventually results in gasoline going into your car. I’m not mentioning this to patronize anyone; I’m mentioning it because the refining side of the equation is staunchly opposed to opening up the export of crude oil. This fact is not so well known or publicized, primarily because it isn’t represented by a major Republican candidate aiming for a 2016 presidential bid.

Should the ban be lifted, the refining industry would see a sizable chunk of its primary commodity flowing out of the country. U.S. crude oil prices are based on the West Texas Intermediate, which is generally lower than Brent crude—the international standard price. The refineries buy the WTI oil, refine it, and sell it as a value added commodity. Oil companies obviously would prefer to sell their oil for as much as possible, and exporting oil would allow them to take advantage of the higher international crude price. It doesn’t take a fracking scientist to see that this is about moving the cup with the economic ball underneath it around the table.

The oil industry—spearheaded by Governor Bush—is naturally claiming that there are a huge number of alternative benefits to them getting the profits instead of the refining industry, because the one phrase they want to avoid at all costs is “more money for big oil.”

That’s the one barrel the American people won’t buy.

The first idea is that this will create jobs. I’m not really seeing that. Putting more oil on boats is not going to significantly increase or decrease anything, and it’s not like the oil companies are suddenly going to hire fifty million new workers to get more oil out of the ground because they’re now incentivized by the free market to blah, blah, blah, economy grows, blah, blah, blah Reaganomics and Milton Friedman. I get it. I’ve heard the argument. I would be more willing to listen if a major part of the motivation wasn’t the fact that the oil companies have a surplus right now. It kind of kills it for me.

Then there’s the national security claim. This is a great one. By letting oil companies export crude, this will reduce our reliance on Russian oil, and thereby make us “more secure.” My response to this is pretty short, frankly. Why now? Because Russia annexed the Crimea?

Sure. Because when you rely on another country for oil production, particularly one against whom you have imposed major sanctions, if their oil industry experiences problems it could affect the international price of oil.

An analogous situation would be something like, I don’t know, when the oil embargo of the 1970s resulted in massive issues with our gas prices, so we implemented a plan whereby our country would be more energy independent by using as much of our own oil as we possibly could.

In other words, if we begin flooding the world with our crude, then if Russia has major economic problems resulting from our sanctions, our crude will take up the slack instead of simply selling it to the refineries domestically in the first place. Tying our crude prices to the instability of the Russian economy we are fostering instead of keeping it domestic is apparently the best way to advance our global national security and economic interests.

I don’t have the word count to get into the environmental issues at hand, but the bottom line is that it’s about the bottom line. Oil companies want money, and therefore anything standing in the way is a political issue for 2016. You can expect to keep hearing how everything I just said is not true, and I’m sure there will be an infinitely rotating Rubik’s Cube of responses that never actually solve a puzzle.

Ben Tomkins is a violinist, teacher, journalist and critically acclaimed composer currently living in Denver, Colorado. He hates stupidity and generally believes that the volume of one’s voice is inversely proportional to one’s knowledge of an issue. Reach Ben Tomkins at BenTomkins@DaytonCityPaper.com.

 

What’s really important about oil?

By Mike Snead

One area of public policy where I focus is U.S. energy security. Thus, when hearing about the proposal to lift the 1975 ban on U.S. crude oil exports, I thought this was not a good idea. However, in researching the proposal it turns out there is no ban on the export of petroleum products, such as gasoline. Thus, the ban on crude oil exports does not really limit the export of U.S. oil, only the form of the oil when it is exported. A recent U.S. Energy Information Administration study on this topic found: “Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports.” With this information, removing the ban is consistent with removing unneeded government regulation.

My initial support for the ban was due to the very serious energy security crisis that the U.S. now faces—a crisis that most are not even aware is happening. Having started this discussion on oil, let’s now step back and take a broader look at America’s lack of true energy security—a topic that I have not yet heard any presidential candidate acknowledge or address.

The U.S. has not been energy secure since the mid-1870s—yes, nearly 150 years ago. Beginning in the 1830s when the population was only about 13 million, the clearing of land for agriculture and pastures for horses, the growing production of iron and its need for charcoal for the iron smelting, and the increasing use of wood fuel for the new steam-powered industrial revolution, caused shortages of wood fuel. Coal mining began. By the 1870s, the production of wood fuel peaked and began to decline. As a result, in the 1880s, with a population of only 50 million, coal became the predominant fuel. At that point, America’s current energy security dependency on non-renewable fossil fuels was created. There was, however, no turning back—no returning to the “land.” The population was too large and still rapidly growing, the nation’s economic prosperity and industrial age standard of living were now firmly tied to affordable supplies of fossil fuels and most of the old growth forests in the eastern U.S. had been cut. (Reforestation was not yet common.) When wood fuel became scarce, there was no alternative but to switch to nature’s “endowment” of fossil fuels. Fortunately, unlike other industrializing nations such as Japan, America started with a large endowment of fossil fuels.

Today, affordable fossil fuels provide 85 percent of the energy consumed in the U.S. Take these away and our nation will collapse. Take even a small fraction of these away and economic recession starts. But, everyone knows that fossil fuels are non-renewable—they will run out. Thus, since the mid-1880s, America has been living in an economic bubble of prosperity based on diminishing supplies of affordable fossil fuels. If this is so, why is this now critical?

A convenient measure of energy use is the “barrel of oil equivalent” or BOE. This is the amount of energy equal to 42 U.S. gallons of oil. Today, our per capita energy use is about 58 BOE per year used directly, e.g., gasoline, and used indirectly to provide the goods and services consumed. In 2010, the U.S. Geological Survey provided their expert estimate of the remaining, technically recoverable “endowment” of oil, coal and natural gas. This included known and yet-to-be-discovered resources. They estimated that the U.S. has 1,366.8 billion BOE of remaining technically-recoverable fossil fuels that can be safely recovered.

The U.S. population in 2010 was 309 million. We are consuming about 18 billion BOE/year of energy of which 85 percent or about 15 billion BOE/year is fossil fuels. A quick calculation—1,366.8 billion BOE ÷ 15 billion BOE/year = 91 years—shows that if the U.S. has to use only our fossil fuels, with no significant imports, the entire remaining endowment would be gone by around 2100. Does this sound like energy security? Unfortunately, this is the optimistic estimate.

We all know that the U.S. population is growing. From U.S. Census Bureau data, the U.S. population will likely grow to around 618 million by 2100. However, with zero net immigration, the population would only be 343 million in 2100. Immigration will add 618 – 343 = 275 million by 2100. As the standard of living is tied to the per capita energy use, this near doubling of the current population will obviously draw down the remaining affordable fossil fuel endowment much faster than 91 years. Hence, immigration policy is very important.

America is now energy insecure. Many think that ground solar and wind energy will easily solve this crisis. However, to meet the 2100 energy needs of 618 million Americans, nearly 500,000 sq. mi. of solar farms or 7 million 500-ft tall wind turbines, covering 1.4 million sq. mi., would be needed. Do these sound like practical solutions? No presidential candidate appears to have any understanding of our energy insecurity predicament. Certainly, our current president doesn’t with his “war on coal.”

Political wrangling about removing the restrictions on crude oil exports becomes trivial in the face of determining what now needs to be done to get ready for the time, not too far away, when affordable fossil fuels are exhausted. Unfortunately, too many Americans and most of our political “leaders” are in the dark about America’s energy insecurity.

Mike Snead is a professional aerospace engineer focused on advanced human spaceflight and energy systems. You can reach him at MikeSnead@DaytonCityPaper.com.

 

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Tim Walker is 51 and a writer, DJ, and local musician. He lives with his wife and their two children in Dayton, where he enjoys pizza, jazz, and black T-shirts. Reach DCP freelance writer Tim Walker at TimWalker@DaytonCityPaper.com

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