Tag: "trade"

Creating Reliance on U.S. Energy

The world that exists today is one of open barriers, and intertwined economies that become necessary in foreign policy. The more entwined economies get the more resistance there is for justifying conflict with each other. It just gets too expensive. It is one of the reasons that a conflict with China is not very realistic despite what some media outlets may say. The best way to accomplish this is through trade of a good, and the U.S. is producing the most sought after good of all, energy. Many countries around the world are recognizing the need for U.S. energy, and Chile just became the latest.

Where many Latin American countries such as Brazil and Venezuela are rich in natural resources, Chile is actually the poorest boasting a measly 150 billion barrels of oil and 3.46 billion cubic feet of Light Natural Gas (LNG). In order to cover for the shortfall the country is turning to light natural gas, and the United States to fill the gap. In the 1990’s the primary provider of LNG for Chile was Argentina and was delivered through a pipeline. Due to domestic shortages in Argentina, Chile had to change its reliance to countries that were further away such as Qatar, Yemen, and Equatorial Guinea.

By creating lasting economic relationships with the Americas, the U.S can help meet their energy needs. In addition to energy requirements, Latin American Counties such as Chile are also making changes to its environmental regulation that resembles the policy of the United States.

central and south american nat gas

LNG is proven to provide a tremendous amount of benefits when comparing to coal and oil. LNG is cheaper than oil, and produces little to no carbon dioxide emissions which have come under fire lately in the U.S. government. While the process of fracking does leak the greenhouse gas methane the amount of leakage varies from 2 to 8 percent. According to a study by the Recorder, if methane leakage is 2 percent then after 55 years the amount of carbon reduced compared to coal use is a staggering 55 percent! While 8 percent leakage of methane still produces a benefit of 17 percent reduction over a course of 100 years. This brings up an extremely interesting scenario; can the U.S. cut the reduction of the planet’s carbon dioxide levels from exporting LNG?

global carbon dioxide emissions

Many in the U.S. continue to go on and on about solar and wind energy, when the facts are simple. The technologies cost billions in research still, do not provide the power that existing energies do, and increase costs for consumers. Even worse to imagine is that these problems are in the U.S. Where we have the most advanced technology in the world, rational thinking would prove that other countries around the world will continue to use both coal and oil.

That is where natural gas exportation comes in. By allowing exports of natural gas, and increasing relations with several countries that have high carbon dioxide emissions, we can curb emissions through the free market. It is a fairly easy thing to accomplish within the government as well. The country would be able to sell cheap, affordable clean energy, and reduce emissions while increasing quality of life in developing countries. It is past the time of easing economic regulations; in order to create prosperity in these countries it must be done utilizing free trade.

The U.S. is at an amazing time in its history where unemployment has hit a 6 year low and 200,000 jobs are being created monthly due to our spur in energy innovation. Markets around have a pressing need for our own labor capital and energy resources. It is time to meet that need.

Jul 07, 2014 | 1 comment | by

Why the U.S. Should Already be the Global Energy Leader

Nearly 40 years ago, United States Congress passed legislation that would cease all exports on crude oil in the U.S. This was done as a way to protect our natural resources, and ensure that the country would have oil in the event of an international incident that would cut off our supply. The belief was that we would conserve what oil we had, and remove dependence on crude oil. However, it did the exact opposite.

production of crude oil

The graph shows the amount of U.S. Field Production of Crude Oil per day from 1970 to 2013. In 1970, production of crude in the U.S. actually peaked and is the most barrels ever produced in a given year. An administration, claiming to preserve our natural interests, did the exact opposite leaving congress puzzled. However, free-market thinkers, are not puzzled. It is clearly visible that U.S. producers of oil realized the shrinking market, and began producing less and less oil. Since it was no longer advantageous to produce oil, they were forced to pull back on production or shut down altogether.

oil rigs

While the Energy Information Administration does not have data for oil rigs going back to 1970, we can see that until 2005 the trend was declining over time. Until the newest energy revolution or “Age of Innovation,” our country was in serious harm of reaching energy dependency. Legislation clearly harmed the oil industry and cost thousands of jobs, all for a result that produced the exact opposite of their intention. In order to achieve the desired effects the administration must do several key things;

  • The first is allowing exports of crude oil. If exports are allowed again, the amount of oil production our country will achieve will be monumental and our lower prices will reflect that.
  • Next, laws must be changed so that a new oil refineries can open in the United States. The amount of innovation and production at existing refineries is substantial, but there has not been a new refinery opened in 40 years. If our production rise is to continue a new refinery must be built.
  • Finally, Obama must open the Keystone pipeline. While many point out the key economic benefits associated with the project such as jobs and lower prices, we must also recognize the diplomatic advantages. Canada wants the pipeline approved as well, and is irritated that Obama has not done so. We must open it to improve relations with Canada, and work with our neighbors in the energy sector. Even Mexico has key energy resources, and with the ability to privatize oil now, we can gain a lot from both of our NAFTA partners.

The volatile nature of international energy markets that includes OPEC members and countries in the Middle East could be avoided with propelling and establishing our own energy sector. We must begin removing the barriers that constrict our energy economy.

Jun 30, 2014 | 6 comments | by

Russian Energy Out, American In

The political climate between Russia and the rest of the world has deteriorated significantly in recent weeks. However, unlike the war methodology of the early world, economic sanctions are the new way to hurt countries.

Russia’s economy is largely dependent on natural gas and oil, producing nearly of 70% of total exports in 2012, 32% of which was crude oil. The majority of these exports go to Europe, as they are wholly interdependent on Russian energy. In order to meet the demands of a full Russian blockade on energy, the European Union would need to invest 215 billion dollars to meet their own energy demands. Even though there is a vast natural gas market to be explored by U.S. companies, the required approvals could take as long as 2019. The companies who have submitted approvals to congress are still having to wait the required times for natural gas.

The closest to exporting is the company, Cheniere Energy, Inc, who can begin exporting as early as 2016. Even if U.S. companies were able to export crude, it would serve only as a motivator because it would take just as long to increase production to sustainable levels since the U.S. still imports 2.7% of its GDP in oil. The European Union is almost identical in its imports. However, if the U.S. were to come together with Mexico and Canada a strong partnership could be created a lot sooner.

amount of oil imported

Congress needs to act quickly on allowing permits because of the European Union’s plan to become energy independent. If the U.S. can begin exporting oil and natural gas quickly then the E.U. would be allowed several years of planning before making risky investments. It is also extremely important to note that while natural gas can be moved by pipeline easily to countries such as Mexico and Canada; there currently exists no infrastructure for exporting to Europe. This makes things even more complicated as it would require billions in research and development.

While it may seem farfetched, the possibility of energy exports to Europe has increased in recent weeks. There is currently a bill proposed that would automatically approve all received natural gas export projects. Since Europe does not have free-trade agreement with the U.S., it would open up the market to all approved companies. Europe has a mounting deficit in energy production, and with Russian relations rocky, the outlook for US companies looks extremely promising. There is a strong push in the U.S. to end the 40 year ban on crude oil, which is the most efficient way to handle the mounting European energy crisis. It would allow a stronger partnership between allied countries and increase the amount of crude production in North America. It would also create the incentive needed to allow U.S. companies to explore and produce for global markets, rather than just the United States.

europe natural gas

There is a strong fear that ending the ban would increase domestic prices but this is not true. Not only would ending the ban create nearly a quarter million jobs but there would be a strong push to increase production and supply, which would level prices in the long term.

Apr 09, 2014 | Leave a Comment | by

What Can We Learn from the WTO Case Against China?

After several years, the official complaint with World Trade Organization (WTO) over China’s export restrictions of rare earth materials has finally come to a conclusion: China’s exportation policies are inconsistent with its obligations to WTO and violate international trade rules.

Precisely because China’s share of the production of rare earths has been reduced from 95% in 2010 to 80% in 2013 leading to a steady price decline, the decision has not had a significant effect on the U.S. economy yet. Many domestic industrial producers, however, still welcome the final decision from WTO. They anticipate that China’s failure in this case may help them regain the competitive edge over China’s domestic and export producers. Additionally, some politicians also claim that this triumph will remain the high-quality, middle-class jobs in the U.S.

On the other hand, some policy analysts argue that the decision could be a double-edged sword which may hurt the U.S. Over the last decade, in order to protect the domestic industrial producers, the government has been implementing a series of import restrictions on some of the critical materials by using antidumping measures. Apparently, China suffers most from the antidumping policies. Therefore, it is entirely possible that China may file a suit against America for its antidumping policies based on the logic in this case. As some economists suggest, being embedded in a global economy, countries are so highly interconnected that any tiny modification may cause significant economic fluctuation. It is time to reconsider our trade policies to create a win-win situation.

Source: Xinyuan Zou is a research associate at the National Center for Policy Analysis.

Apr 07, 2014 | 2 comments | by
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