An oil tanker from the U.S. left for South Korea last night, the first unrestricted oil export since the 1970s oil embargo. This is worth celebrating, but it took so much behind the scenes finagling to get over regulatory and political hurdles that it remains to be seen if this might really be the first step on the road to the ultimate goal of energy independence.
As the Wall Street Journal reports, getting that tanker from Texas sailing toward South Korea took quite an effort:
How that $40 million shipment avoided the nearly four-decade ban on exporting U.S. crude is a tale involving two determined energy companies, loophole-seeking lawyers, and an unprecedented boom in American drilling that could create a glut of ultralight oil [such as condensate].
Exports were banned four decades ago when shortages in oil meant that Americans were lining up at the gas station to fill their tanks. But those days are long gone. Indeed, because of developments in drilling technology – hydraulic fracturing specifically—we are in the midst of an energy – oil and gas – boom. Natural gas and shale oil are being used domestically in just about every industry that requires energy – from making kids toys to fertilizer. An industry coalition charts how this drilling is leading to job growth in several areas of the country. But exporting oil and gas is equally important. We have more than we can use and foreign demand is huge, from countries like Japan and South Korea.
There is another reason for the U.S. to press forward with oil exports, however. There are pressing national security considerations—if we sold more energy to the Europeans, they would not be so fearful of punishing Russia for its brutality in Ukraine.
As Diana Furchtgott-Roth explained it recently, US exports could hurt Vladimir Putin:
Of the 18.7 trillion cubic feet of natural gas consumed by Europe in 2013, according to the Energy Information Administration, Russia supplied 30 percent. About 50 percent to 60 percent of Russian natural gas exports go through Ukraine… In the United States natural gas for September delivery traded at about $3.75 per million British thermal units, compared to nearly $10.00 per million BTUs in Europe.? That is why America could immediately assist [Ukraine President Petro] Poroshenko by selling some of the gas to Ukraine and Europe, undercutting Russia, which gets half its revenues from oil and gas.
Despite the benefits to the U.S., the ultimately successful quest to export a tiny bit of condensate shows how difficult it is to get through the government red tape.
President Obama has been critiquing Congress for not doing anything. In the area of lifting barriers to energy exports, there is much to that criticism. As Furchtgott-Roth explains, there are steps legislators could take to alleviate the problem.
Congress could amend the Natural Gas Act to ensure that the Energy Department approves liquid natural gas export applications within a short period of time. Or it could pass legislation allowing LNG to be exported to all World Trade Organization members, irrespective of whether they have free trade agreements with the United States. Or, it could go still further, and cease to require approval for LNG exports.
Two oil companies found a way to get around government regulations to get their oil from Texas to South Korea. It will take more pressure to get Congress to reverse a decades-old policy and then severe political pressure on the White House to agree to support those changes. But this is the right thing to do.