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Exporting America's Oil No Longer a Slick Idea

It’s time to throw out those “American Energy Independence” bumper stickers from the 2012 election and forget about US energy self-sufficiency because now the oil industry’s top priority is to repeal the 40-year-old ban on exporting America’s oil.

This is the reason the oil lobby has dropped any reference to US “energy independence” it used while spending tens-of-millions to try to hedge the outcome of the last presidential election through “energy voter” campaigns.

With a report released just after the 2012 election predicting the US was on track to become a net oil exporter, suddenly it became all about energy exports, and “energy superpower” replaced “energy independence” as the new catchphrase.

Since the US Energy Information Administration estimated lifting the ban would add $25 billion in US oil sales by 2025, exporting America’s oil has looked like a sweet deal for US oil companies: Screw “National Security” if we can get higher prices overseas for crude oil dug up from public lands owned by the American people.

Make no bones about it, this is about “crude” oil; US oil companies have been allowed to export unlimited oil-based gasoline, diesel and jet fuel to other countries for decades at a nice profit. 

But crude oil prices have plummeted from $115 per barrel in the summer of 2014 to now below $40, forcing oil companies to slash spending, cut jobs, and only tap oil at high-profit sites. And returning oil prices to even a comfortable industry break-even point of $70 isn’t expected to happen for years.

So why have oil lobbyists been so busy pushing to export oil now? It seems current trends have added to Big Oil’s panic:

One year after the Organization of Petroleum Exporting Countries chose not to limit production in order to crush competitors, OPEC decided Friday to continue the policy, as well as embrace Iran’s return to the oil market when international sanctions are lifted in the next few months. Iran had already pitched $25 billion worth of oil and natural gas investments to foreign investors at a two-day conference in Tehran last weekend, though no US companies were there.

The Paris climate talks happening now could result in an investment risk by forcing “stranded” oil assets to be left in the ground, according to a BlackRock report. Meanwhile, oil producers have already canceled over $200 billion of investments; 37 oil and gas companies have already filed for bankruptcy; and divestment from fossil fuels has already exceeded $3.4 trillion. 

Growing local, state and federal regulations on oil production, fracking, air quality, and endangered species also have lobbyists busy. The EPA closed the public comment period Friday for methane pollution standards targeting the oil industry and environmental groups are appealing a US District Court decision to delay federal rules set to take effect in June requiring developers to disclose the chemicals used in fracking on federal lands while an industry-backed lawsuit proceeds. The push to stop fossil fuel development on public lands and offshore has also resulted in recently introduced “Keep It In the Ground” legislation.

Calls have increased for the Justice Department to probe how ExxonMobil hid research into climate change while the New York Attorney General is investigating whether Exxon violated any laws in how it presented what it knew to investors. A group of House Democrats want to expand the investigation to include Chevron, ConocoPhillips, BP, Shell and Peabody Energy.

A Securities and Exchange Commission rule that requires oil companies to report “payments” made to foreign governments is moving forward despite attempts since Oct. 2012 by the American Petroleum Institute and US Chamber of Commerce to stop it.

The Western Governors’ Association meets this weekend in Las Vegas with the federal Endangered Species Act – which holds up public land drilling – a major focus. Even Anadarko Petroleum, which reported a $2.2-billion loss for the third quarter, has found enough cash to hire Freemyer & Associates specifically to lobby on Endangered Species Act issues.

The US House just passed the North American Energy Security and Infrastructure Act – which includes amendments ending the oil export ban – after already voting Oct. 9 to lift the oil export ban, claiming it “will provide domestic economic benefits, enhanced energy security, and flexibility in foreign diplomacy.” The House and Senate also passed resolutions to repeal the Clean Power Plan, all symbolic votes which are not veto-proof.

While the Obama’s administration’s decision in August to allow American firms to sell some oil to Mexico is viewed as a crack in the export ban to be exploited now, the slick lobbying effort to sell American oil overseas is running on fumes since US firms can’t produce oil as cheaply as most other nations to compete in the global market.

The International Energy Agency’s World Energy Outlook predicts the price of crude will remain around $50-60 into the 2020s. But US financial experts are all over the place on price. Moody’s forecasts oil prices for 2016 at $48, while Wood Mackenzie sees the low-$70s the second half of 2016 and a Goldman Sachs report see prices dropping to $20.

Problem is, much of US oil production is only economic at between $55 to $70 per barrel, depending on who you talk to. With West Texas Intermediate selling as of this writing at $37.67 and Brent at $40.73, US companies have to be able to produce a barrel for substantially less – and then pay to ship it – to make a profit. According to Rystad Energy, one US barrel currently costs $36.20 just to pull it out of the ground, while for Iran its $12.60 a barrel; Iraq $10.70; and Saudi Arabia $9.90.

Nevertheless, the American Petroleum Institute is pushing to lift the export ban on the premise that it will eliminate the US trade deficit, create jobs and provide low gas prices for Americans – a re-hash of the arguments used to “sell” more drilling during the “I’m an Energy Voter” 2012 presidential campaign, as well as lobbying efforts for the Keystone pipeline.

But the new twist is to re-brand the idea, wrap it in an American flag, and sell exports as a way to make the world a safer place by providing global consumers a choice. “As we grow as an exporter, US energy leadership has the potential to bolster America’s allies, expand our geopolitical influence…and further strengthen our position as a global energy superpower,” notes API.

In other words, making America an “energy superpower” would limit US allies’ dependence on the global boogeyman de jour of Russia, Iran and Saudi Arabia. Yep, if we drill-baby-drill for more oil on public lands and export it, the US can weld political power at will in the form of “energy security.”

Interestingly, this time China is not the boogeyman but the potential market since China reportedly plans to add nearly 90 million barrels in 2016 to its own strategic petroleum reserves, even as Chinese national oil companies are set to acquire some Texas oil fields.

The oil lobby also insists “prohibiting US exports is partly responsible for the global crude oil glut.” Most analysts disagree, noting even developing countries are using less oil. According to the EIA, the world produces 95.5 million barrels per day but uses under 94 million, leaving about 1.5 million barrels of surplus oil each day unneeded. With global storage tanks filling up, this surplus oil is being redirected to tanker ships at sea, pushing rates for supertankers up to nearly $100,000 a day.

“The current global market does not seem to be, in reality, looking for that oil,” Energy Secretary Ernest Moniz told an Oct. 6 Senate hearing.

Independent global oil traders foresee this oil glut lasting deep into 2017.

Needless to say, with the economic realities of America’s “energy renaissance” worsening for the fossil-fuel industry, it will be interesting to see if the oil lobby can actually pull off getting the crude oil export ban lifted.

Some analysts say its unlikely to happen before the 2016 elections – an election with Republican presidential hopefuls that support lifting the ban and Democratic presidential front-runner Hillary Clinton saying she would consider lifting the ban if there are “concessions from the oil and gas industry.”

But the oil lobby has made it a top priority and is willing to cut a deal to make it happen now. And that should have those trying to stop oil exports concerned over motivations and unintended consequences.

Shipping dirty crude oil overseas – essentially exporting climate change – would go along way in avoiding future climate-related regulations, which may be why some oil companies are actually supporting a carbon price.

And speaking of shipping crude oil, nothing says “bulls-eye” to terrorists like a fleet of oil tankers sailing from American waters offering a hundred-fold version of exploding oil trains and Deepwater Horizons combined. 

The export ban was originally intended to offer national security by ensuring domestic oil – oil taken from our public lands – is used at home to benefit American consumers.

But that was 40 years ago.

Today, energy companies have reached new levels of influence over America’s energy and foreign policy through the flow of political money at levels inconceivable in the 1970s.

So today, with Big Oil more interested in short-term gains and market share, it’s clear energy “independence” and energy “security” have become code words meaning “independence” from regulations, and “security” for stockholders and future profits.

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