Recently, former Sen. William S. Cohen made headlines by presenting a thorough and persuasive argument that President Obama should seek to make crude oil exports a part of US trade policy. The argument was presented via Time and pointed specifically to four main benefits the U.S. could enjoy by focusing more on energy exports:
1 – Exports would strengthen NATO by providing an adequate Western response to Russia’s practice of withholding energy resources as a power play. Energy exports from the U.S. would provide European allies with an alternative to dependence on Russia.
2 – Exports to the Far East would promote economic growth in allies like Japan and South Korea while opening the possibility of collaborative trade efforts with influential countries like China and India.
3 – Energy exports could promote a great deal of collaboration with Central and South American countries. According to reports by FXCM, Venezuela remains the country with the single highest volume of oil reserves. With approximately 297.6 billion barrels on reserve (ahead of Saudi Arabia’s 267.9), the country is naturally viewed as the leading source for this part of the world. However, Cohen’s argument points out that domestic challenges are causing Venezuela to scale back its exports. This results in a new need for energy resources, which the U.S. could provide, for much of the hemisphere.
4 – Easing restrictions on U.S. crude oil exports could drastically improve the economy and job situation at home. Cohen notes that crude oil exports would essentially serve to further the energy boom that has already had positive effects on the U.S. economy, specifically pointing to the “shale revolution” as an example.
As mentioned previously, it’s a very convincing argument for an increased focus on energy exports for the U.S. Not only have new technologies essentially increased the United States’ energy reserves by opening new avenues for obtaining resources, but shifts in geopolitics around the world have simultaneously created new needs in various regions. These two factors would seem, as Cohen suggests, to foster natural trade partnerships that could be extraordinarily beneficial for the U.S. economy and also save President Obama’s legacy on trade.
So why haven’t we gone about it already? Well, as is often the case with political matters, it’s a problem that sounds simple but has proven to be exceedingly complicated. Basically, as is explained in an article at Bakken, a U.S. ban on crude oil exports has been in place since the 1973 Arab oil embargo. Also, various periods of inaction in Congress since then have resulted in the ban’s ongoing existence.
This means that before the U.S. can turn its attention toward organizing and implementing crude oil and energy export programs, Congress and President Obama will have to work together to lift an existing ban. As has been proven over the years, such a collaborative effort is difficult to come by. The hope, in this case, is that the clear benefits of increased energy exports by the U.S. both abroad and at home will yield a rare sense of partnership between the president and Congress.
It’s a lot to hope for, but the benefits are clear. In the aforementioned Bakken article, former CIA director Leon Panetta and NSA advisor Stephen Hadley were quoted with the most simple explanation of the idea of energy exports: “The U.S. can provide friends and allies with a stable alternative to threats of supply disruption…. This is a strategic imperative as well as a matter of economic self-interest.”
It’s hard to imagine why we wouldn’t give it a shot.
Jenna Batten is a freelance writer based outside of Baltimore. She typically covers topics in finance, politics, and travel, and has contributed to numerous publications online. When Jenna isn’t writing, her hobbies include sailing and web design.
Note from Mover Mike – there has been some concern about exporting natural gas. Some have argued it would be good for our balance of trade, but the increased demand would raise prices for a very cheap fossil fuel here at home.