Tag: "trade"

Feeling the Heat — Oil Export Stalemate in Venezuela

Typically when a currency falls in value, investors flock to purchase that country’s assets and exports under the new exchange rate. The Venezuelan government however, is stuck producing nearly the same output. Why? Simply put, because of the South American country’s involvement in the Organization of the Petroleum Exporting Countries (OPEC) and its incredible reliance on oil, which is estimated by Reuters to be responsible for 96 percent of government revenue. Venezuela is in a position where it cannot produce more oil — to take advantage of break-even costs as low as $40 per barrel — or less, due to burgeoning global supply’s effect on prices.

Venezuelan oil production has not risen substantially in almost two decades:

This is not the byproduct of a lack of private interest in the country: exploration and extraction companies such as Chevron already operate within Venezuela and the Bolivarian government even claims grievances against ExxonMobil for resource theft by its international waters with Guyana. This is not because the country is attempting to use its reserves more sustainably — Venezuela has the largest deposit of proven oil reserves, and owns over 17 percent of the world’s oil, compared to the rest of Latin America, which collectively owns less than 5 percent. The combined lack of productivity and revenue is due to OPEC quotas, which have become a thorn in President Maduro’s side. This has effectively stunted Venezuela’s production capacity compared to its neighbors:

Venezuela’s recent attempts to counter economic collapse and civil unrest have come in the form of two new deals:

Much like Nicaragua and Venezuela’s accord to trade coffee beans for crude oil, and Cuba and Venezuela’s deal to trade oil for teachers and doctors, Uruguay has now agreed to begin trading food for oil
India has joined China in becoming a key consumer of Venezuelan oil, with a long-term investment plan of $143.7 billion being put in place to develop infrastructure for oil production in Venezuela

Even if OPEC were to scale back production tomorrow, all of these attempts to harness and expand on the country’s competitive advantage are likely futile for Venezuela itself, as it has a fixed supply quota it cannot surpass. Additionally, because of that quota, strengthening oil trade with Asian countries has meant neglecting and making cutbacks with the rest of Central and South America. Supply shocks are already being felt in Petrocaribe, a trade bloc of Caribbean nations which rely heavily on Venezuelan crude.

Apart from simply diversifying their economy and liberalizing the market, it is becoming increasingly urgent that Venezuela corresponds with the needs of its people rather than the whims of OPEC. The ailing nation should reduce these regulatory barriers such that its production more accurately reflects growth in global oil demand, it is after all one of the few oil-rich nations that has yet to do so.

Apr 22, 2015 | 1 comment | by Santiago Bello

The Case for Lifting the Crude Oil Export Ban

The United States is running out of room in its crude oil storage facilities and the question is ― where does the crude go now? As domestic crude oil production continues to rise, it has no place to go due to an obsolete ban on the exportation of crude oil in the U.S.

The International Energy Agency said in its monthly oil market report that U.S. supply shows no signs of slowing down, an assessment that pushed the price of crude below $57 a barrel and lowered gas prices at the pump. Low gas prices led to record amounts of driving in 2014, culminating in a record-breaking December, new federal data shows.

With the U.S. now producing more oil and natural gas than Russian and Saudi Arabia, over 11 million barrels a day (55 percent increase from five years ago), lifting the U.S. oil export ban would:

Add over $1 trillion in government revenues by 2030.
Create 300,000 more jobs a year.
Increase current U.S. production from 8.2 million B/D currently to 11.2 million B/D.
Cut the U.S. oil import bill by an average of $67 billion per year.
Lower gasoline prices by an annual average of 8 cents per gallon.
Save U.S. motorists $265 billion for during the 2016-2030 period.

Despite the fact that oil imports are at the lowest level since 1985, the U.S. still imports 33 percent of its oil from foreign sources. A broad view by the public is that U.S. oil should stay at home will test export proponents. A majority of voters, 53 percent, opposed exporting oil. At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be. The increased economic activity resulting from the rise in crude production would support an average of 394,000 additional U.S. jobs over the 2016-2030 period, with a peak of 964,000 jobs in 2018.

Doing away with exports restrictions would also generate added benefits to U.S. household income, gross domestic product (GDP) and government revenues. The average disposable income per household would increase by an additional $391 in 2018 as benefits from increased investment.

The current hydraulic fracturing and American energy boom is reducing oil imports by 22 percent next year. Lifting the crude oil export ban would increase the energy boom. This boom could also reduce the oil imports of European countries. The United States could replace Russia title as “Europe’s gas station” and provide all of Europe’s energy needs.

Mar 18, 2015 | 3 comments | by Lloyd Bentsen

Keep Oil Prices Down by Passing Keystone XL

The Tampa Bay Times conducted a fact check on some statements made by Senator John Thune of South Dakota on Sunday. The fact check covered two main points:

―President Barack Obama’s own administration has done five environmental impact assessments of the Keystone XL pipeline

According to the fact check, the U.S. State Department actually had one report on the pipeline that included several drafts and a major revised version that considered a more environmentally sound route change in the pipeline.

―All of which have said it would have a minimum impact on the environment

While the State Department study found that the pipeline would have minimal impact on the environment, the Environmental Protection Agency worries of a greater impact from the pipeline’s greenhouse gas emissions than the study found.

The new Republican leadership in the Senate plans to have a friendly, open amendment process with Democrats with a goal of passing the pipeline bill. The bill is expected to have enough votes to be filibuster proof, and if not enough to override a presidential veto, enough to force the president to wield his veto pen and take a position on this controversial issue. The claim that gas prices are too low for the new addition to Keystone to have a positive economic impact does not consider that the pipeline will take time to build (and time to get approved) and by then, prices could be up even to record high prices.

Jan 05, 2015 | 1 comment | by Lloyd Bentsen

Fast-Track Keystone XL Plan Doomed to Fail

Coordination by the House and Senate to quickly pass the Keystone XL pipeline was doomed to fail last week. The coordination was awkward, to say the least, the House easily passed the approval of the pipeline, yet again, while the Senate had an entirely different situation.

The Senate never had the votes to pass the approval process. However, one senator’s seat was threatened in a runoff. Senator Mary Landrieu’s support of the pipeline and its approval in the Senate, could have been enough to help her win the runoff election. Harry Reid called for the vote and said that they had the 60 votes for approval. They miscounted. Now Landrieu’s seat is really in jeopardy. If the vote had been called months earlier, the votes could have been mustered to have more than enough for approval of the pipeline.

After a wasted effort due to a miscalculation, the pipeline will still have enough votes in the Senate next year from the election. If the opponents of the Keystone XL pipeline come to terms with the economic benefits of the pipeline, they may understand how much their fears were over exaggerated.

Nov 24, 2014 | 1 comment | by Lloyd Bentsen

The KEEP Energy Act

If it were not for the $300 billion boost to the U.S. economy and the more than two million jobs added each year from the oil and gas industry, we could have been in a second Great Depression. To add to this economic boom, the 114th Congress can quickly pass new legislation, such as the KEEP Energy Act according to Mark P. Mills in today’s Forbes.

KEEP is an acronym for Keystone, EPA, Exports and Production.

Keystone XL pipeline approval would be a very important symbolic victory for the United States and its allies. The pipeline would also add thousands of more jobs.
The Environmental Protection Agency needs to be reined in. The EPA’ rules and regulations threaten the economy and is gearing up for new rules for the fracking boom.
The oil and gas export ban over the past several decades, has not made sense for one of our most basic values of free global access to trade. There is even more reason to end this obsolete ban with our allies in Europe and elsewhere in great need for these energy supplies.
Energy production could increase much more if the federal government opened more lands to drilling and if there was more investments made in technologies such as horizontal drilling and hydraulic fracturing.

Nov 10, 2014 | 4 comments | by Lloyd Bentsen

Reducing Europe’s Dependence on Russia, Benefits United States

As tensions over the situation in the Ukraine heightened over the last few months, sanctions were thrown left and right between Russia, the United States and the European Union. The sanctions targeted the Russian banking and energy sectors, putting pressure on Russian President Putin’s inner circle.

Since the sanctions, Russia has lost $75 billion in capital worth, faces weaker direct investment and is teetering on the brink of recession, according to the BBC.

Unfortunately, Russia wasn’t the only one impacted by the sanctions. As one of the biggest energy suppliers in the world, Russia ranks in the top five producers of both petroleum and natural gas and is a huge energy supplier to the E.U. Sanctioning Russia could very well backfire on many E.U. nations.

So the question remains: how can the global community, and in particular the U.S., take action against Russia without risking E.U. economies?

According to Stephen Cheney’s Wall Street Journal op-ed, the answer is simple: expediting the export of liquefied natural gas (LNG) from the U.S. to the E.U. and its neighbors.

Oil and natural gas sales accounted for 68 percent of Russia’s total export revenues in 2013, according to the U.S. Energy Information Administration (EIA). From natural gas alone, Russia took in $73 billion last year.

The U.S. has seen booming growth in the natural gas industry over the past few years, and that growth is only expected to continue. According to Cheney, a recent Citigroup study predicted that the U.S. energy industry would add 665,000 new jobs and be a net exporter of energy by the end of the decade, and that by 2035 $115 billion would be added to the U.S. gross domestic product.

Creating U.S. LNG exports would transfer $4 billion in wealth from Russian consumers to European consumers, according to a 2013 Deloitte study. Additionally, says Cheney, reducing Europe’s dependence on Russia would increase the national security of both the U.S. and its allies. Yet the U.S.’s restrictive export laws only allow exports to be sent to nations with which the U.S. has a free-trade agreement, or after a lengthy permit process to ensure the export is within “the public interest.”

If opening up U.S. exporting restrictions to allow U.S. companies to export liquid natural gas could increase natural security, add jobs, and increase the security of our allies, shouldn’t that fall within “the public interest?”

Megan Simons is a research associate at the National Center for Policy Analysis.

Oct 29, 2014 | 2 comments | by Lloyd Bentsen

Lower Energy Prices Help Many Americans Stay Warm

Many Americans struggle during the winter with expensive and excessive consumption of energy resources to keep warm. Inflated energy prices really puts a strain on many families and their budgets. However, this upcoming winter will be a bit easier to get through, thanks to the fracking boom.

Propane prices are 24 percent and consumption is 13 percent lower.
Oil price reduction allows a 15 percent reduction in heating oil energy spending.
Homes will use 10 percent less gas and 5 percent gas bill reduction.

The recent fracking boom has not only lowered energy prices for consumers, but also benefited the United States economy. Fracking’s benefits are very important to American consumers. This benefit will increase as fracking technology advances and the option to export our natural resources becomes more of a reality.

Oct 08, 2014 | 2 comments | by Lloyd Bentsen

Major Effort to Lift Oil Export Ban

Despite a fear of rising gasoline prices at the pump, a strong lobbying effort will be aimed at persuading lawmakers and administration officials that the United States can afford to export crude oil now that the country is the world’s biggest oil producer.

The U.S. pumps more than eight million barrels of oil a day.
An increase of 55 percent from five years ago.
The U.S. still imports 33 percent of its oil from foreign sources.
Oil imports are at the lowest level since 1985.

A broad view by the public is that U.S. oil should stay at home will test export proponents. A majority of voters, 53 percent, opposed exporting oil in a poll conducted this year by FTI Consulting. Republican voters opposed oil exports more than Democrats did, the poll found.

However, according to a study by IHS last May, lifting the ban on U.S. crude oil exports would lead to:

Increase current U.S. production from 8.2 million B/D currently to 11.2 million B/D.
Add investment of nearly $750 billion.
Cut the U.S. oil import bill by an average of $67 billion per year.

At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be.

The additional crude oil supply that would be generated if exports restrictions were removed would:

Lower gasoline prices by an annual average of 8 cents per gallon.
Save U.S. motorists $265 billion for during the 2016-2030 period.

The increased economic activity resulting from the rise in crude production would support an average of:

394,000 additional U.S. jobs over the 2016-2030 period
With a peak of 964,000 jobs in 2018.

Aug 27, 2014 | Leave a Comment | by Lloyd Bentsen

WTO Rules on China’s Rare Earth Exports

World Trade Organization (WTO) ruled recently that China’s rare earth elements (REE) export restrictions violate international trade regulations.

China has a 90-percent stranglehold on the bulk of supply and a 70-percent share of global consumption.
China is looking at removing REE export taxes, which were levied at a rate of 15 to 20 percent.
The new tax regime “will force Chinese rare earth producers to raise prices towards levels outside China.”
The impact in the short term could be significant, as domestic prices are generally 36 percent lower than FOB prices.
Should China manage to clean up its smaller mines and consolidate its REE industry, the country could solve the current overcapacity situation.

By Vivien Diniz of Resource Investing News

Aug 20, 2014 | 1 comment | by Lloyd Bentsen

Europe’s Necessary Energy Dependence Switch

Now is the time for the United States to break the Middle East and Russian dominance of global energy supply. Providing our energy resources to Europe would break the old global energy system and bring Europe geopolitically closer to the United States. The National Review’s “Marshall Plan for Energy”, explains that the U.S. has the resources and the timing is right assist in economic and political stability in Europe through energy resources.

Over one-third of Europe’s oil and natural gas comes from Russia and other countries of the former Soviet Union.

Imports from Russia have grown 10 percent in the past decade, while imports from elsewhere of LNG (the liquefied form of natural gas) have fallen 50 percent.
Shipping 2 million barrels of American oil to Europe per day would cut the E.U.’s dependence on Russian petroleum in half.
Sending just over 2 trillion cubic feet of America’s natural gas to Europe annually would halve the E.U.’s reliance on Russia’s gas pipelines, many of which cross Ukraine.
U.S. oil production is the fastest growing in the world and has risen by 3 million barrels per day in just four years.
U.S. natural-gas production has jumped by 4 trillion cubic feet per year over the past four years, also entirely on private and state lands.

Aug 11, 2014 | 1 comment | by Lloyd Bentsen

Tag: "trade"

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