(Image by Robson Machado from Pixabay)
[Editor's note: This story originally was published by Real Clear Energy.]
By Mike Sommers
Real Clear Energy
Global energy markets face a delicate rebalancing act as the world navigates around Covid variants, inflation, and a patchwork of quarantine policies. As economic activity rebounds, demand for oil and gasoline has outpaced available supply, putting upward pressure on gasoline and energy bills. What’s needed is more supply – and policies that bring reliable, American-made energy to consumers. Instead, in recent weeks, we have seen a series of short-sighted moves that could further exacerbate supply shortages and add to the challenges we face.
First, President Biden has asked foreign nations to increase global oil supply while at the same time promoting and implementing policies slowing American energy development. Then, on Black Friday, the Department of the Interior recommended raising fees on U.S. energy production. Next, erroneous reports this week indicated that the administration was considering limits on U.S. crude oil exports, a move that IHS Markit analysis shows could send the global economy into a recession.
Independent experts also point to limits on energy trade as bad policy that would weaken America’s standing around the world and turn our own assets into other nations’ windfall. Limiting the export of 3 million barrels of U.S. crude oil per day will not affect global energy demand and will leave a supply void that foreign producers would happily fill – an early holiday gift to OPEC+ in the form of increased market share.
Recent history reminds us why President Obama ended this wrongheaded policy in the first place. Indeed, he and Congress worked together on a bipartisan basis to lift a nearly 40-year-old ban on crude oil exports in 2015. Democrats and Republicans agreed that the ban was a relic of 1970s-era energy scarcity and was counterproductive in light of America’s world-leading natural gas and oil production. Lifting the ban increased energy security for the United States and its allies abroad, reducing reliance on energy from less friendly nations. Unwinding such clear progress would harm America’s future and exacerbate current market imbalances.
What we know is that more energy – not less – is needed to jumpstart and maintain a healthy global economy. Keep in mind that there are nearly 7.8 billion people on our planet today, and the global population is growing. Nearly 270 infants are born worldwide every minute, and Earth’s population could reach nearly 10 billion people by 2050. Energy demand is likely to increase over time, according to global economists. Renewable energy is helping to close the gap, but experts say nearly 50 percent of the world’s energy will come from natural gas and oil in 2040 even if nations meet their Paris Agreement targets. Why would America cede an obvious geopolitical advantage to others?
Practical supply chain realities are at play, too. Many U.S. refineries process only a heavier type of crude oil, which, prior to the repeal of the export ban, led to an oversupply of U.S-produced light, sweet crude oil. Disrupting international oil markets with a U.S. export ban would force inefficient use of highly specialized refineries, discourage domestic production, and dictate a reshuffling of international oil flows – all of which historically have put upward pressure on global crude prices. The per-barrel cost of crude oil is the No. 1 factor in the cost of producing gasoline, diesel, and jet fuel.
According to independent experts, limits on the export of U.S. crude oil will not necessarily provide lower prices on energy and would act as a significant disruption in the American heartland and across the world. The answer to market volatility is a rebalancing that comes from increased U.S. supply – not proposals that restrict access to America’s energy resources and cancel important infrastructure projects. Simply put, open and competitive markets foster domestic production and benefit American consumers. Policymakers should reject any attempt to reinstate a significantly flawed export-ban policy.
Mike Sommers is the president and CEO of the American Petroleum Institute.
[Editor's note: This story originally was published by Real Clear Energy.]
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