It seems that every time there is a spike in gasoline prices, Bill O’Reilly chimes in with his idea that if we produce it here, we should use it here. He’s even proposed a special tax on exports of petroleum products. He somehow believes that, even though oil is a global commodity, it would cost less for Americans if we kept it all here.
O’Reilly has a big listening audience, and if you don’t understand oil, the global markets, and what it truly takes to be “energy independent”—which most people don’t have time to think about—O’Reilly makes sense. Instead of the 2008 election cycle slogan: “Drill here. Drill now. Save money,” his mantra would be: “Produce here. Use it here. Save money.” People trust O’Reilly and the folks have embraced his ideas on energy—particularly when it comes to oil.
I know this because I do a lot of radio interviews and speaking engagements where I answer questions from audience members (and talk show hosts) and they bring up the “We need it here” philosophy. Sometimes they even mention O’Reilly’s name, almost daring me to disagree. I do disagree. But, I never felt like I knew enough to go deep on the “export” issue. I knew enough to provide an adequate answer and have even written on the topic. I wanted to understand it better.
With this in mind, I was especially pleased when I received notice about a new study, released this past week, from the Manhattan Institute. “Liberating the energy economy: what Washington must do” is authored by Mark Mills—Mills writes the “Energy Intelligence” column for Forbes and is the coauthor of The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy. Mills has been an unwitting mentor of mine.
I’ve learned well. Much of what the study addresses I’ve written on. For example, Mills says, “It is now realistic for America not just to feed the world, but to fuel it as well. … The United States can quite literally drill, dig, build, and ship its way out of the current economic and jobs malaise. … This growth in energy abundance occurred without policies intended to encourage it, and it has happened almost entirely on private and state—not federal—lands. … The new reality of hydrocarbon abundance makes possible not only energy independence but also a credible scenario in which the Middle East is displaced as the world’s primary energy exporter.” If you regularly read my column, these themes should have a familiar ring.
Mills’ comment about America not only feeding the world, but fueling it as well, was an “ah-ha” moment for me—especially in relationship to the idea of exporting our domestic resources.
America is the world’s largest exporter of wheat. We grow so much that we have more than we need. The same can be said for many other food supplies—both grown and raised. America truly does feed the world. When we export food, no one squawks: “Don’t export, it will make our prices higher.” Or, “We need to keep it all here.” On some years, due to a drought, perhaps, there may be less supply. Disease may decimate the pig population. When that is the case, the prices go up. In other years, weather conditions are perfect, and there is a bumper crop; herds are healthy—the prices go down. Whether wheat or pigs, the food supplies are a global commodity, priced by the global markets and influenced by supply and demand.
There are variables in growing our food supplies. We cannot predict—try as we may—what the exact production will be, nor what the exact need will be. As a result, we produce as much as we can and sell the excess to a hungry world. Our ability to produce more than we need gives us independence and allows us to export.
If we tried to only produce exactly what we needed—but weather caused a drastic drop in production, we’d have to import from others at a much higher price. The fact that we produce more than we need gives us food security. Exporting food supplies helps bring an element of balance to our trade deficit.
As Mills explained to me, our energy security is much the same. Currently, we are not energy secure—or, more accurately stated, oil secure. We are dependent on the production surpluses of other countries such as Saudi Arabia. The availability of their oil can be controlled by a whim, or by geopolitics. When more is available, global prices go down; less, up.
America’s new-found wealth in natural resources—specifically oil and natural gas—means that we can have energy security—which comes from having excess; more than we need so we can export. If we truly want energy independence which every president since Nixon has espoused, then isolationism is the wrong approach.
I can just hear O’Reilly: “You’re all wrong. We can grow more wheat. We can raise more pigs. Oil is a finite resource.”
This is because O’Reilly, and many Americans, are stuck in the 1970s’ paradigm: “There is an energy shortage.” As Mills says, “If the last four years have shown us anything, it is that the technology makes our supplies fundamentally unlimited. We will not run out.”
Mills’ report states: “Technology is now doing for the American energy and fuel sectors what it previously did for the agriculture sector. … Last year the United States exported almost $140 billion in agriculture goods and about $120 billion in hydrocarbons. Within a year or so, we will likely export more fuel and petroleum products than food.”
According to a recent US Energy Information Administration summary of the nation’s “proven reserves” of oil and natural gas, the United States has reversed a 40-year decline in oil output to become the world’s fastest-growing hydrocarbon region—North Dakota’s Bakken Field is just one of many examples.
“Policies that accelerate hydrocarbon production could create at least 3 million jobs and $3-$7 trillion worth of economic benefits, radically resetting energy geopolitics” is a point supported by the “Liberating the Energy Economy” study. Mills claims that there are only three impediments preventing America from enjoying the associated trade, jobs, and revenue benefits that could come from fueling the world—and each could be solved with the stroke of the executive order pen:
- Complexity—Expansion and imposition of new rules within all federal agencies has added layer upon layer of requirements which creates ever-greater complexity as different agencies have different objectives, interpretations, cultures and even directives.
- Creep—Without consideration of cost and without accountability, rules and regulations, and how they are interpreted, have moved away from the original intent.
- Capriciousness—The growth in regulations creates confusions and unintended conflicts in purpose and implementation, resulting in daunting compliance challenges.
President Obama’s favorite word of this campaign cycle seems to be “fair.” Agriculture products, and just about everything else, can be exported without special permission—the Department of Agriculture even has an office dedicated to “export assistance.” Yet, the Energy Policy and Conservation Act of 1975 prohibits the export of unprocessed crude oil. How is that “fair?”
The world has changed. The United States is now in a position to be the most important source of both food and fuel—but bold policies are required. It is time to find the political will to reset the national energy framework to take advantage of the new resource abundance and employment potential—this is a revolution that can take place without one penny of taxpayer money.
The launch of a credible long-term national supply strategy to support and expand North American energy production will help mitigate price swings caused by unexpected constraints on other supplies or unexpected global demand—bringing certainty into the market. And that, O’Reilly, helps the “folks.”
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