U.S. Energy Exports: A Big Economic Plus

By SBE Council at 13 August, 2014, 7:57 pm

The energy sector is not a zero-sum game, so when it comes to energy exports the U.S. economy benefits significantly as it does from rising exports in other industries.

by Raymond J. Keating-

More exports are good news for the U.S. economy, as they generally feed stronger U.S. economic, income and employment growth. Almost everyone understands the facts of economic life on exports.

The positives of rising exports apply to energy as well. And since the U.S. has been transformed in recent years, due to private sector investment and innovation, into a global energy superpower, it’s worth taking a moment to look at some key trends in terms of trade and energy.

Coal. U.S. coal exports (short tons) increased by 197 percent from 2002 to 2013. Meanwhile, total U.S. coal production actually declined by 10 percent over this same period, reflecting, in large part, a hostile federal policy environment toward coal use in the U.S. U.S. coal exports equaled 12 percent of coal production in 2013, compared to only 3.6 percent in 2002.

Petroleum products. Since 1999, U.S. finished petroleum products exports have grown solidly. As measured by thousand barrels per day, exports jumped by 278 percent from 1999 to 2013.

Crude oil. U.S. crude oil exports increased from 9,000 barrels per day to 120,000 per day from 2002 to 2013. However, that compares to U.S. production of 7.5 million per day in 2013. And U.S. crude oil production jumped by 49 percent from 2008 to 2013.

Natural gas. From 1999 to 2013, U.S. natural gas exports (nearly all of it via pipeline to Canada and Mexico) grew by 862 percent. Exports as a share of production over that period have increased from 0.8 percent of 6.1 percent, as natural gas production grew by 29 percent.

As we have seen particularly with the astounding expansion in oil and natural gas production and proved reserves in recent years, the energy sector is not a zero-sum game. That is, investment, innovation and growth occur, and new resources are discovered, accessed and supplied. And opportunities exist to meet both domestic and international demand.

When it comes to export opportunities, the U.S. energy agenda is clear.

Trade Agreements.  First, push ahead with free trade agreements that reduce governmental barriers to trade, such as tariffs, quotas, etc. That includes advancing the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership.

LNG Approval Process. Second, accelerate the approval process of U.S. LNG (liquefied natural gas) export licenses, allowing the U.S. to compete globally in meeting the increasing demand for natural gas.

End Ban on Crude Exports. Third, end the nearly four-decades old ban on most crude oil exports. The ban made no sense when imposed in 1975, and certainly makes no sense today amidst rising U.S. oil production.

Consider a May 2014 study by IHS, which reported the following if the U.S. crude oil exports ban were lifted:

• U.S. crude oil production would increase, “beginning with an additional 949,000 b/d in 2016” and “peaking at 1.3 million b/d of additional production in 2030.”

• “The resulting increase in crude production would support 359,000 more jobs in 2016 before peaking at 964,000 additional jobs supported in 2018. 700,000 additional jobs would be supported in 2020 with an annual average of 222,000 additional jobs supported for the remaining years of the study period [that is, 2016 to 2030].”

• “Gross domestic product would rise by nearly $73 billion in 2016. The amount would increase to more than $134 billion additional GDP in 2018 and settle at an additional $106 billion in 2020. It would then average an additional $73 billion annually for the remainder of the study period.”

• “The average disposable income per household would increase by an additional $391 in 2018 as benefits from increased investment, additional jobs and lower gasoline prices are passed along to consumers. That figure is expected to be an additional $332 in 2020 and average an additional $193 per year for the remainder of the study period.”

• “The additional crude oil supply would lower gasoline prices by an annual average of 8 cents per gallon, the study says. The combined savings for U.S. motorists during the 2016-2030 period would translate to $265 billion compared to a situation where the restrictive trade policy remains in place.”

Freeing up U.S. businesses and workers to meet growing economic demands around the world is an unmistakable economic plus, including when it comes to energy.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship and available from Amazon.com here.