Oil Tanker with a tug boat escort passing under the Corpus Christi Harbor Bridge
There is no denying that the anti-fossil fuel lobby is having a major impact on the race for the Democratic Party’s 2020 presidential nomination. These well-funded groups have already pressured Democratic presidential candidates like Bernie Sanders and Elizabeth Warren to promise to ban hydraulic fracturing.
They’ve already succeeded in pressuring pretty much all of the Democratic field, even the moderates, to pledge to work to eliminate the use of oil and natural gas in the nation’s transportation and power generation mix. They’ve even convinced front-runner Joe Biden – a former strong advocate for natural gas – to pledge to start putting fossil fuel company executives in jail should he be elected to the presidency, a pledge the former Vice President made during the party’s most recent televised debate.
But these anti-fossil fuel pressure groups are not resting on the success they’ve achieved thus far in influencing these candidates’ policy positions – far from it. On Tuesday, a pair of organizations announced they will now go after crude oil exports.
Greenpeace and Oil Change International released a report which claims that reinstating limits on crude exports could lead to significant annual reductions in global emissions. While that claim seems specious on its face, given that any void created by a sudden stoppage in U.S. production and exports would quickly be filled via production and export increases by Saudi Arabia and other exporting nations, such a move would be a brilliant tactic for those whose real goal is to harm the U.S. oil industry and kill the ongoing domestic oil boom that has so greatly enhanced U.S. energy security in recent years.
Think about it: Just four years and one month ago it was illegal to export a single barrel of U.S.-produced crude without possession of a permit issued by the U.S. Commerce Department. Such permits were rare and not easily acquired.
But in December 2015, Congress passed an omnibus spending bill that included language repealing the 1977 law on which the export ban was based. The passage of that bill has facilitated both the rapid growth in production coming out of the Permian Basin region of West Texas and Southeast New Mexico, and the amazing ramping-up in U.S. exports of crude coming mainly from that basin and the Eagle Ford Shale region of South Texas.
Indeed, one can point to that single federal policy change as the seminal event that has allowed the United States to now stand as world’s largest producer of both crude oil and natural gas, as the associated gas from Permian oil wells has flooded the market. The U.S. has also become the third-largest exporter of crude oil during that same period.
One does not have to agree with the approach by GreenPeace and Oil Change International to understand its tactical genius. The simple fact of the matter is that much of the light, sweet crude being produced from these shale formations either had to be exported or remain in the ground due to limits on domestic refining capacity.
Historically, because the U.S. had been dependent on imports for such a high percentage of its daily oil consumption, most of the refining capacity has been designed to process heavier grades of crude coming in from overseas. This is especially true of refineries along the Texas and Louisiana Gulf Coast, to which virtually all Permian/Eagle Ford crude flows.
Thus, if a new Democratic presidential administration decides to reinstate the irrational ban on exports, a very high percentage of Permian/Eagle Ford crude would be unable to find a refining home. The cost of such a move to the economies of Texas and New Mexico would be gigantic, and that cost would reverberate across the country.
One can get an idea of the scale of that economic cost from a study released on Monday by the U.S. Chamber of Commerce’s Global Energy Institute (GEI). That study focuses on the pledge by several Democratic presidential contenders to ban fracking, a move that would have a similar practical impact on the industry as a ban on exports. The GEI estimates that a ban on fracking would cost the state of Texas alone 3.2 million jobs and a somewhat astonishing $1.5 trillion in lost gross domestic product during the 2021-2025 time frame.
As with the Greenpeace/Oil Change International study, one does not have to agree with these exact numbers in order to recognize that the economic costs of these harsh anti-oil and gas policy proposals would be massive and would negatively impact the entire U.S. economy.
The anti-fossil fuel lobby believes those costs would be a good thing since elimination of economic growth is one of their key goals. All the school children in Texas and New Mexico attending beautiful new schools and the patients in the new, modern hospitals that have been and will continue to be built all across Texas and New Mexico thanks to all the added tax revenues provided by the oil boom might disagree. So might the hundreds of thousands of Texans and New Mexicans now holding down high-paying jobs in the industry and its supporting businesses.
At the next televised Democratic debate, you should expect to hear several of the candidates, having been pressured by the anti-fossil fuel lobby, to endorse the prospect of reinstating the ban on crude exports. You should not expect them to in any real way acknowledge the massive costs of such a move.
