Senate Report Calls for President Obama to Lift Crude Oil Export Ban

Senator Lisa Murkowski

Senator Lisa Murkowski, R-Ala., released a report on June 9 advocating for the end of the crude oil export ban. She is the chairperson of the Senate Committee on Energy and Natural Resources.

The report—titled “Rendering Vital Assistance: Allowing Oil Shipments to U.S. Allies“—called for President Barack Obama to end the ban as well as provide oil for allies, such as South Korea, Poland and Japan. As a result, these countries would not depend oil coming from Russia or Iran:

Many U.S. allies and trading partners are interested in purchasing American oil to diversify away from Russia, Iran and other problematic sources. Allowing such shipments would send a powerful signal of support and reliability at a time of heightened geopolitical tensions in much of the world. The mere option to purchase U.S. oil would enhance the energy security of countries such as Poland, Belgium, the Netherlands, India, Japan, and South Korea, even if physical shipments did not occur.

The crude oil export ban was first implemented on Dec. 22, 1975, through the Energy Policy and Conservation Act in response to the 1973 OPEC oil shock. Then-President Gerald Ford signed the legislation into law and said “the long debate over national energy policy” was over.

Currently, the U.S. provides an exemption to Canada over crude oil exports and operates an exchange program with Mexico. It additionally exports crude oil to Israel, as part of an agreement, in case the latter suffers from a shortage.

As noted in the report, “the Obama administration renewed the agreement following a bipartisan letter led by Senators Lisa Murkowski and Mark Warner, D-Va., sent in April 2015, encouraging the Department of State to expedite its renewal.”

Murkowski, after taking over as leader of the Senate energy committee, immediately vowed to lift the crude oil export ban. She introduced, on May 12, S.1312 in the Senate energy committee, which intends to end the ban.

At the CERAWeek conference this year, which brings together oil and gas industry leaders and government officials in Houston, Murkowski told an audience it was “time to lift America’s ban on domestic oil exports.” She referred to the P5+1-Iran negotiations as a reason why the ban would need to be repealed.

“We should not lift sanctions on Iranian oil while keeping sanctions on American oil. It makes no sense,” Murkowski said.

Moreover, Murkowski co-authored a piece with Senator John McCain, R-Ariz., and Senator Bob Corker, R-Tenn., for Foreign Policy where they argued allies of the U.S. need crude oil for security:

The benefits to global security of allowing oil shipments to our trading partners are obvious and indisputable. Our friends in Asia, eager to comply with Western sanctions against Iran, would have a new alternative source for their energy needs.

Senator Maria Cantwell, D-Wash., who also sits on the energy committee, was cautious about an end to the ban. Cantwell wanted to know what impact such a change would have for U.S. consumers:

The information we have thus far is inconclusive to how lifting the ban on oil exports may impact consumers – especially those in the Pacific Northwest, who experience some of the highest gasoline prices in the nation,

Jesse Coleman, a researcher for Greenpeace, told Firedoglake the recent oversupply was a reason why such calls to lift the crude oil export ban are happening.

“These oil companies are being caught, as the industry have been caught many times in the past, with a massive oversupply. So they want to overturn the oil export ban,” Coleman said.

Coleman additionally criticized the rhetoric used against Russia despite firms working with the country.

“They say it will stop Vladimir Putin and these companies are working with Russian companies,” Coleman said.

In early 2014, the President Obama signed a series of executive orders barring companies from working with Russia including oil. Although, ExxonMobil, in the same year, was able to work with the Russian government to drill in the Arctic. Still, most companies are unable to work with the Russian government due to sanctions.

The call to end the crude oil export ban is not new. The American Petroleum Institute, a trade association representing more than 600 U.S. oil and gas companies, advocates an end to the ban.

John Felmy, API’s chief economist, cited restrictions to fossil fuel growth as stopping the U.S. from growing as an “energy leader:

Unfortunately, there’s a limit to how much we can grow as an energy superpower if U.S. oil and natural gas producers aren’t able to access the global market. We have every reason to protect and accelerate America’s growth by lifting outdated export restrictions,

Even Secretary of Energy Ernest Moniz said, in December 2013, there were issues “that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s.”

Recently, a report by Bank of America-Merrill Lynch Global Research found a “surprising amount of support” from Congress to remove the export ban. In fact, the authors of the report believe there is a 50 percent chance the ban will be repealed in the next two years.

Jared Margolis, staff attorney at the Center for Biological Diversity, told Firedoglake, if such a law was passed, calls for more trains and pipelines to carry the crude oil would increase.

“There’s going to be a push for more crude oil trains, certainly. There’s going to be a push for more pipelines,” Margolis said.

A major concern, in regards to trains, is use of “bomb trains,” which can explode because of numerous factors including the volatility of the crude oil.

While crude oil is transported mostly through pipelines, trains are becoming a more cheaper, popular option. The New York Times highlighted last year how such “a business was nearly nonexistent” six years ago.

In recent years, there have been more accidents involving such trains and Margolis said it will grow if the crude oil export ban is lifted.

“[You’ll have] increased rail traffic and, as a result of that, you’ll have more rail accidents,” Margolis said.

Murkowski, in all of her speeches, reports and writings on crude oil, does not address the impacts of oil-by-trains. Although, in the Foreign Policy article, she noted, along with McCain and Corker, “any environmental impact [because of crude oil production] would also be negligible, as American oil is produced under some of the strictest safeguards on the planet.”

Coleman said to Firedoglake the amount of land sacrificed for crude oil was “mind-blowing.”

“You don’t have to look after 2010 with the BP oil spill to be aware of crude oil spills. That’s just one instance,” Coleman said.

BP released a report last week showing how the U.S. replacing Russia as the world leader in oil and gas exploration. Most of this is light, sweet crude oil.

Margolis authored a report in early February on the environmental consequences of oil trains and the lack of serious government effort to regulate “bomb trains.”

“Economics drives regulations a lot of time. The concern is that these agencies tend to be captured a lot of times,” Margolis said.

The report by Margolis also cites risks associated with light crude oil produced in Bakken region of North Dakota, where it is “generally more explosive, more toxic and can penetrate soils more quickly and deeply than traditional crude.”

As Margolis stressed, all fossil fuels like crude oil are best left alone because of climate change.

“From top of the bottom, these are what we call extreme fossil fuels. If we want to prevent climate change, we need to keep this stuff in the ground,” Margolis said.

Image from United States Congress and as such is in the public domain.

Former OPEC Official Believes Price of Oil Will Fall This Year

Oil refinery in Philadelphia, PA

Hasan Qabazard, former director of research at OPEC, said the Brent crude oil price will fall to at least $40 per barrel later this year.

Qabazard cited more oil production by Iraq and Iran, along with recovering shale oil, as the reasons why a drop will be expected.

Currently, the Brent crude oil price is hovering nearly $70 per barrel after a sharp drop last year from more than $100 per barrel.

In 2009, Qabazard predicted the price of oil possibly falling, although it rose a few months later.

Still Qabazard is not alone in believing the price of oil will fall as Goldman Sachs reported last May how the price of oil may go as low as $45 per barrel. In fact, analysts at the bank believe there is no equilibrium between the supply and demand of oil:

We find that the global market imbalances are in fact not solved and believe that the rally will prove self-defeating as it undermines the nascent rebalancing,

OPEC recently finished a conference in Vienna, Austria, where the group decided it would not cut supply.

Qatari Minister of Energy and Industry Mohammed Bin Saleh Al-Sada spoke on the first day of the meeting and mostly blamed the drop in oil prices on “speculators.”

Al-Sada also suggested recent conditions were tough for countries producing oil:

The current environment is clearly challenging – and has become a test for both oil producers and hydrocarbon investors,

Saudi Arabia’s Minister for Petroleum and Mineral Resources Ali Al-Naimi said early last week the market was stabilizing and the current strategy by OPEC was working:

You can see that I am not stressed, that I am happy,

Meanwhile, Iraq is seeking to increase its crude oil exports to get as much money as it can after the massive drop in oil.

Adil Abdul-Mahdi, the country’s oil minister, previously told reporters how oil prices would rise to $75 per barrel by the end of this year.

In terms of Iran, Iranian Petroleum Minister Bijan Namdar Zangeneh said, before the conference in Vienna, how Iran would sell on the market whether OPEC liked it or not:

We don’t need permission from OPEC to return to the market. This is our right, we were limited by sanctions and this is completely normal if we return to the market with the ceiling we had before [the sanctions were imposed],

Moreover, Zangeneh said foreign oil companies were interested in coming back to Iran once the internationally imposed sanctions against Iran were removed.

ExxonMobil hired a lobbyist to “monitor congressional activity” over anything Iran related, although the firm insisted it had done no such thing.

Based on a report by the Energy Information Administration, the United States is estimated to produce even more crude oil in the next few years:

Total U.S. oil production is projected to increase 23 percent between 2014 and 2020. After 2020, tight oil production declines, as drilling moves into less-productive areas,

 

Qabazard may be right after all.

*Creative Commons Licensed Image by pontla  

Nigerian President-Elect Seeks to Shift Investment From Oil to Other Sectors

Nigerian President-Elect Muhammadu Buhari, who beat incumbent Goodluck Jonathan and will take office on May 29, pledged to invest more resources into other sectors of the economy like agriculture instead of relying on oil.

Buhari believes such investments will provide much-needed jobs for Nigerians, especially amid the massive drop of oil prices:

In the economy, we have to quickly turn to agriculture and mining because that is where you can do the quickest work and earn results.

In terms of oil exports, Nigeria is a top producer with the country being Africa’s largest petroleum producer. Moreover, it holds the most natural gas reserves out of all African countries.

In addition, Nigeria is a member of OPEC after joining in 1971. The country depends so much on oil and gas that it “accounts for about 35 percent of [the nation’s] gross domestic product.”

Although, being the country with the most oil includes some downsides such as corruption. Indeed, The Wall Street Journal reported on June 19, 2000 how, in spite of their profitability, resources, including oil, have been a clutch for African nations such as Nigeria.

‘With the advent of oil, the government lost its initiative,’ sighs Chidi Duru, a Nigerian lawmaker who blames the oil feeding frenzy for the decline of the country’s once-prosperous farm economy. ‘In a sense it has become a curse, not a blessing.’

Recently, allegations arose that the previous administration, under President Goodluck Jonathan, took $20 billion from oil revenues. Ngozi Okonjo-Iweala, the country’s finance minister, denied it ever occurred.

Nigeria also depends on energy imports because its refineries are not reliable enough to fuel the country. For a country once believed to be the next Saudi Arabia or Kuwait when oil was discovered in the 1950s, oil has failed to develop the country, even though it accounts for as much as 25 to 30 percent of the country’s GDP.

In 2005, crude oil production peaked at 2.4 million barrels per day, yet “began to decline significantly as violence from militant groups surged, forcing many companies to withdraw staff and shut in production.” (more…)

Obama Defends Decision Allowing Shell to Drill for Oil in the Arctic

Arctic Destroyer Arrives in Port Angeles

President Barack Obama defended his recent decision to allow Royal Dutch Shell to drill in the Arctic Ocean by saying he was reassured there were “strong safeguards” in place.

Josh Earnest, press secretary of the White House, elaborated more on the Obama administration’s decision as part of the “all-of-the-above approach” at a press briefing on May 12th.

Earnest additionally noted President Obama previously protected the Arctic National Wildlife Refuge and even increased investments into renewable energy, all a part of the “all-of-the-above approach.” Thus, he said, allowing Shell to drill was just a part of this strategy:

[W]hat’s also true is the President is committed to ensuring that we are doing as much as we can to protect our energy security, and that means looking for opportunities to safely develop sources of energy on American soil. And I think this—again, this decision reflects the effort to pursue that all-of-the-above approach

Interestingly, however, Shell experienced technical problems last month with its oil rig, which questions why Obama felt confident in Shell’s ability to drill without any doubts.

Moreover, Obama believed, in spite of the problems with fossil fuels, oil and natural gas would need to be used and preferred obtaining it domestically than going overseas.

The decision to allow Shell is very controversial, especially among environmentalists.

In Seattle, for example, the “Shell No!” movement is growing against drilling in the Arctic. Indeed, the Port of Seattle, in a 3-1 decision, voted to ask Shell to delay drilling to begin after public pressure. (more…)