New Global Energy Leader: The United States
NCPA May 31, 2013
In the last few years, the United States has blown past Russia to become the world's largest producer of natural gas, and America will shortly occupy the number one position in oil production as well. The United States is poised to become a major hydrocarbon exporter to an energy-hungry world, says Mark Mills, a senior fellow at the Manhattan Institute.
There are concerns that the new U.S. position on the world energy stage has major downsides. Notably, we're told that this radical change could destabilize many of the world's fragile hydrocarbon exporters, from Russia to Nigeria and from Venezuela to the Middle East. These experts warn that the loss of oil revenue will cause shockwaves in countries that have increased spending (and mischief making) on the prospect of eternally selling $100 per barrel oil to the world, especially to America.
U.S. energy abundance is an unalloyed good for the American economy. The United States can start eviscerating its whopping $750 billion a year trade deficit, which rivals the combined deficits of the next 30 largest nations. It is a terrible drag on U.S. growth. And 40 percent of our deficit comes from just one import: oil.
We can now eliminate those costs by:
- Doing everything possible to encourage yet more production of hydrocarbons to cut imports.
- Using cheap domestic fuel to manufacture and export more energy-intensive products like chemicals and fertilizers.
- Joining the small club of crude oil and natural gas exporting nations.
The problem with the last deficit-killing strategy is that exporting American natural gas or crude oil is illegal.
- A 1975 law prevents crude oil exports, with only rare exceptions.
- Last year the United States became a net exporter of gasoline and diesel; exporting refined petroleum products is permitted.
- Oil in the heartland sells up to $40 below world prices, but cannot be exported to willing buyers.
The American energy sector is on track over the coming 10 years to see private investments reach a cumulative $5 trillion -- without subsidies or taxpayer assistance. It makes no sense to restrain this sector. The past four years alone have seen $150 billion of foreign investment in U.S. hydrocarbon domains. No government stimulus or infrastructure investment begins to match this scale of private activity. Imagine if, instead of constrained, it were encouraged.
Source: Mark Mills, "We Need a 21st Century Energy Policy," Real Clear Energy, May 24, 2013.