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- Female Activist Criticizes Rouhani’s Failure to Protect Citizens
- Iran’s 1st female bodybuilder tells her story - Iranian lady becomes a Dollar Millionaire on Valentine’s Day - Two women arrested after being filmed riding motorbike in Iran - 43,000 Cases of Child Marriage in Iran - Woman Investigating Clinton Foundation Child Trafficking KILLED!
- Senior Senators, ex-US officials urge firm policy on Iran
- In backing Syria's Assad, Russia looks to outdo Iran - Six out of 10 People in France ‘Don’t Feel Safe Anywhere’ - The liberal narrative is in denial about Iran - Netanyahu urges Putin to block Iranian power corridor - Iran Poses ‘Greatest Long Term Threat’ To Mid-East Security |
Saturday 20 September 2014Should America Be Exporting This Valuable Resource?By Adam Galas The 1973 OPEC oil embargo was a wake-up call to America. Occurring at a time when U.S. oil production was in decline, the quadrupling of oil prices in 1974 resulted in President Ford signing the Energy Policy and Conservation Act in 1975, which banned the export of U.S. crude oil. The goal was to insulate America from the potentially volatile global crude markets that proved to be a danger to our economic prosperity. However, as the second price spike (from the Iranian Revolution) and 2007 proved, this policy has not worked.
Meanwhile, Energy Secretary Ernest Moniz stated that during his most recent trip to Seoul, South Korea's Energy Minister brought up the issue as well. In addition, Jose Manuel Carrera, the CEO of PMI Comercio Internacional, the trading arm of state-owned oil company PEMEX, recently told Reuters that his company has been discussing beginning oil shipments from the U.S. with government officials and potential sellers. Why the sudden pressure to lift the ban?
Similarly, Mexico's oil production has been declining for nine straight years. The situation is so dire (PEMEX provides 33% of Mexico's federal budget) that on December 20, 2013, Mexican President Pena Nieto signed an amendment to the Mexican constitution that allows, for the first time in 76 years, foreign, private investment into Mexican oil and gas fields. Meanwhile, Europe, which has joined America in opposing Russia's recent actions in the Ukraine through sanctions, is vitally concerned about Vladimir Putin's leverage over the continent's energy supplies. Russia supplies 30% and 35% of Europe's gas and oil, respectively (36% and 39% for Germany). The situation is far worse for nations such as Austria, Turkey, and Greece, which get 50% of their gas from Russia, while the Czech Republic and Finland are 100% dependent. The geopolitical situation has escalated to the point that gas prices have soared 35%, and our European allies fear that Russia may cut off its gas entirely this winter. The Europeans are going so far as to make an emergency contingency plans to stockpile gas, in case Russia turns off the gas taps, by banning the reselling of gas and even imposing limits on its industrial use. Given that the EU's economic growth was non-existent at just 0.2% in the second quarter, and the fact that these actions might very well put Europe into a recession, one can see just how scared our allies are about their dependence on Russian energy. Global oil demand rising, as are disruptions in supply Though this forecast is a downward revision from last month, in the face of growing global oil disruption, the world's spare capacity (which maintains price stability) is becoming dangerously slim. As the above graph illustrates, turmoil in the Middle East and sanctions against Iran have taken 4% of the world's oil supply offline. Should sanctions against Russia be taken to their extreme potential limits, that figure could continue to grow. America: the world's swing oil producer Despite the global supply disruptions and escalating geopolitical tensions with Russia, oil prices are near 13-month lows, and this Labor Day, gas prices were the lowest they've been in four years.
What happens if America restarts oil exports? Companies such as ExxonMobil (NYSE: XOM ) and ConocoPhillips (NYSE: COP ) are lobbying for the elimination of the export ban entirely, arguing that America's record export of gasoline and diesel prove exports won't raise domestic energy prices. According to research and analysis firm IHS, lifting the oil export ban would lower gas prices by eight cents per gallon because oil companies would likely increase production enough to lower the global oil price and offset the decreased domestic supply. In fact, IHS's latest study indicates that ending the export ban would be a major boon to both the economy and federal budget: $1.3 trillion in additional tax and royalty revenues to the government between 2016 and 2030. Noted energy historian and IHS vice chairman Daniel Yergin recently told reporters, "This would be a significant economic stimulus that would be paid for by the private sector, not by the government -- in fact, the government would make a lot of money." Foolish takeaway Do you know this energy tax "loophole"? |