Politics of abundance

Aug. 24, 2015
Attention returns to the antique US ban on exports of crude oil with reports that limited shipments to Mexico have been approved. The oil and gas industry should use the moment to expand the discussion to energy in general.

Attention returns to the antique US ban on exports of crude oil with reports that limited shipments to Mexico have been approved. The oil and gas industry should use the moment to expand the discussion to energy in general.

Approval by the Commerce Department of a swap of US light oil for Mexican heavy crude signals no major change of US policy. Cross-border exchanges of crude are accommodated by the laws creating the export ban. They, like all but a few niche cases such as exports to Canada, require licenses. It's the cumbersome need to apply for federal sanction of nearly any shipment of crude outside the US, under conditions far from clear, that constitutes the ban.

Reports about the Mexican swaps come as political forces seem to be aligning in favor of repealing the export ban. That, of course, is what Congress should do. Lawmakers are to address the question after they reconvene in September.

Elevating the message

Export supporters in the oil and gas industry have convincingly described what ending the ban would accomplish: debottlenecking logistical systems, boosting domestic production, rewarding investment in refining complexity, and enhancing market efficiency overall. Now they should elevate the message to what ending the ban would mean.

If it ends the ban on US exports of crude oil, Congress will show it understands that the oil market has changed since the 1970s. What needs to be underscored is how much it has changed.

With oil, the US is swinging from shortage to abundance. For 3 decades, the governing assumption of policy-making and industry planning was geologic constraint. Thanks to technology, geologic constraint isn't what it used to be. The industry now can produce oil and gas from low-quality reservoirs holding enormous volumes of fluid hydrocarbons formerly considered beyond technological and economic reach. Technology also enables producers to develop oil and gas in conventional but challenging reservoirs in once-unimaginable water depths.

These new sources of supply are costly to develop and challenged at the moment by crude-price weakness in an oversupplied market. But price weakness won't last forever. And technology lowers costs.

Clear now is that the US and its neighbors to the north and south have resources able to yield oil and gas at rates many times greater than what historically has been assumed and for longer into the future. That potential should be central to official decision-making about energy, the framework for which should encompass economic and strategic imperatives.

Yet the national conversation about energy increasingly occurs solely within the narrow, often radically defined confines of climate change. Increasingly, therefore, energy policy amounts to encouraging development of renewable sources and discouraging the production and use of hydrocarbons. When economic and strategic considerations do receive attention, the contributions of renewable energy are inevitably exaggerated.

Because they can help moderate emissions of greenhouse gases, renewable sources deserve places in policy and the energy mix. They just shouldn't dominate discussion or policy-making because they can't, notwithstanding improvements in the economics of wind and solar, dominate the energy mix-not now and not for many decades.

Oil and gas have form advantages not easily overcome by energy from the sun, wind, and biomatter. And they're economically available in quantities that are-in dramatic contrast to prevailing assumptions of a relatively few years ago-growing.

Heightening radicalism

Climate-change activists, knowing what the swing toward hydrocarbon abundance means for their agenda, respond with heightening radicalism. Lately they've added a metric to their manifesto for centrally planned energy: to prevent development of 80% of oil and gas reserves. This represents lunacy, of course. But so does a 7-year delay in approval of the Keystone XL pipeline border-crossing. Single-issue lunacy now dominates US energy policy.

Oil and gas abundance is a hard fact and historic opportunity that activists are wrong to resist. It has made the crude-export ban a relic needing repeal. And it deserves consideration, alongside climate change, as a priority national interest.