President Barack Obama has been aggressively promoting the advantages of fast-track authority for his Trans-Pacific Partnership free-trade agreement by pushing a message of job creation, economic growth and American competitiveness.
“As we speak, China is trying to write the rules for trade in the 21st century,” Obama said earlier this year. “We can’t let that happen. We should write those rules.”
Yet, as the White House stumps for free trade, it drags its feet on liberating our own U.S. energy industry from archaic export barriers that were put in place decades ago.
Pennsylvania for years has served as a model of how experiencing and embracing its own energy renaissance has led to an increase in jobs and a boost in its economy.
Now nationally, other parts of the country are experiencing a similar shale oil and natural gas revolution, which has led to a rewriting of the rules that even the most respected experts thought were inviolable: diminishing resources, more geopolitical risk and ever-higher prices.
In a March 30 report, the U.S. Energy Information Administration announced that crude oil production in 2014 showed the largest volume increase since record-keeping began in 1900.
On a percentage basis, last year’s output increased by 16.2 percent, the highest growth rate since 1940. Most of the increase occurred in North Dakota, Texas and New Mexico, where hydraulic fracturing and horizontal drilling were used to produce oil from shale formations, the EIA said.
As a result, crude-oil inventories are now at their highest level (relative to demand from refiners) since the mid-1980s, and storage depots have been filling up everywhere. Estimates of recoverable oil and natural gas reveal vastly more potential.
The most recent supply projections for liquefied natural gas (LNG) show that domestic producers using today’s technology have the potential to develop more than 750 trillion cubic feet of recoverable shale gas.
In Pennsylvania, the energy “stimulus” to the economy has been remarkable. Marcellus Shale-related industries support about 243,000 jobs in the commonwealth and have contributed more than $34 billion to its economy.
Energy production in Pennsylvania, according to industry sources, saved the state and local governments $19 billion and the public schools $45.5 billion in 2012 and 2013.
Pursuing free trade in energy would produce even greater benefits. According to a study by energy research group IHS, lifting the crude export ban would add between $86 billion to $170 billion in additional annual economic output for the United States. That translates into a range of 394,000 to 859,000 new jobs every year nationwide (total energy industry employment already approaches 10 million).
In Pennsylvania, the study estimates the total crude-oil-export employment contribution could average between 11,126- 29,276 jobs between 2016 and 2030.
In fact, as The Economist reported recently, there is so much domestic crude oil being produced that American oil sells for about $10 a barrel less than it does in the rest of the world.
Normally, this would be a welcome notion; however, everyday Americans don’t even experience the savings from this artificial discount, as the price of gasoline we buy is set in the international market. Essentially, this is a ban that benefits some American oil refiners, who then ship the gasoline out of the country.
There is additional policy support for easing the current regulatory hurdles for LNG exports.
In its latest report, the White House Council of Economic Advisers put it succinctly: “Expanded natural-gas exports would generate more jobs, incentivize increased domestic production, strengthen U.S. geopolitical security, promote a cleaner environment at home and abroad and help American manufacturers maintain a healthy competitive cost advantage in natural gas.”
It’s important to remember that this is not all about the big energy companies. Spurring free trade in energy will benefit the thousands of smaller independent producers responsible for 95 percent of U.S. oil and natural gas wells (or 67 percent of domestic production).
A recent study by the Small Business and Entrepreneurship Council found that more than 90 percent of these businesses had fewer than 500 employees.
In Pennsylvania alone, establishments supporting oil and gas operations with less than 20 workers grew by 173.3 percent, and those with less than 500 workers grew by 236.4 percent from 2005 to 2012.
Accelerating crude oil and LNG exports will allow U.S. energy industry to increase its investments across the country, drive more of the innovations that have made the United States a global energy leader and expand the energy jobs market.
Furthermore, opening the export gates for outflows of American oil and gas to a growing global market will enhance U.S. influence in an increasingly dangerous world.
It’s time to free domestic energy from the bans and bottlenecks that limit our nation’s ability to trade with the world.
President Obama should be promoting not only expanded trade with Asian partners, but exports of LNG and crude oil to secure a lead on our global competitors.