Energy Exports Are Weapons in Russian Diplomacy

By C. Dean McGrath

Tensions between the West and Russia have deteriorated to their lowest ebb since the end of the Cold War.

Russia is threatening to cut off energy supplies to Western Europe in the hopes of undermining Western resolve. Russia provides the European Union with more than a third of its oil and almost 40 percent of its natural gas. Consequently, Russia believes that Western Europe will shy away from serious sanctions out of fear that the Kremlin will retaliate by choking off energy exports.

The United States can ameliorate Russia’s threat to scale back oil exports by eliminating our current restrictions on the ability of oil and natural gas companies in the United States to ship surplus oil and gas to foreign markets, including Western Europe.

The United States is now the world’s number one oil and natural gas producer — beating out both Russia and Saudi Arabia. Thanks to high-tech extraction technologies like hydraulic fracturing, American crude oil production has increased to 8.4 million barrels a day, a 24-year high. And by 2016, the U.S. Energy Agency predicts that the domestic natural gas supply will exceed domestic demand.

America now faces a glut of oil and gas resources. But despite our energy wealth, government restrictions make exporting that surplus nearly impossible. Natural gas exports face huge bureaucratic hurdles. And crude oil exports are banned outright.

These restrictions are antiquated relics of an older era. The crude oil export ban was put in place nearly 40 years ago in an attempt to conserve domestic energy following the 1973 Arab oil embargo. America’s energy landscape has changed dramatically since then.

Today, the United States has an abundance of oil and natural gas. But the crude oil coming from places like Texas and North Dakota is too light for Gulf Coast refineries to process. Converting these refineries would be extremely costly and time consuming. And because pipeline development hasn’t kept pace with oil production, transportation bottlenecks prevent companies from shipping light crude to the East Coast for refining in a timely manner.

That leaves many with a bounty of oil – and no one to sell it to. They’d welcome the opportunity to ship it to hungry European refineries that are already equipped to process light crude and are willing to pay for it.

Removing bureaucratic impediments to exporting natural gas could have an even more profound impact on Russia’s energy economy.

Although exporting natural gas isn’t technically banned, energy companies must first receive approval from the Department of Energy. Right now, more than 20 applications to export natural gas are “pending” approval. Some applications have been under review for almost three years.

According to NERA Consulting, U.S. natural gas exports could cut Russia’s gas revenues by 30 percent over the next five years — and by up to 60 percent within the next 25 years.

What’s more, lifting the restrictions on energy exports could bolster the American economy. The research group IHS estimates that lifting the crude oil export ban would add $15 billion to the U.S. economy each year and create hundreds of thousands of jobs.

With Russia now a growing threat to the United States and her allies, we need to consider all of our options. That includes addressing Russia’s energy threat. Doing away with our needless export bans and restrictions would certainly help.

C. Dean McGrath, Jr., who served under Presidents Ronald Reagan, George H.W. Bush, and George W. Bush, is an attorney in Washington DC and an adjunct professor of law at Georgetown University.

© Copyright 2014 Tanna K, All rights Reserved. Written For: Tinytown Unleashed
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