ICYMI: CRS memo asks wrong questions on crude exports and Eastern Europe

CRS has published a memo (May 29, 2015) on oil exports demonstrating the principle that if you ask the wrong question, you may not get the most helpful answer.  The CRS memo looks at ability of Eastern Europe to absorb US crude oil, if policy did not prohibit this.  But the real question is how might Eastern Europe be impacted if US oil exports are allowed – after all, there is a global market for oil so it may not matter WHERE the US oil is actually consumed.  Instead, the impacts for Europe could be transmitted through the global market for oil. While the CRS memo acknowledges that lifting the ban on U.S. crude oil exports would tend to reduce the global price of oil, it seems to overlook the potential beneficial impact on Eastern European countries and refiners. CRS notes that there are various reasons why lifting the U.S. crude oil ban may not result in sales to Eastern European refiners including the fact that their refineries may not be well suited to process U.S. light sweet crude and lack of infrastructure to get it to them. However, CRS seems unclear about the fact that if U.S. crude oil…

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Don’t Let Environmentalists Set Trade Policy Agenda

See my response to this week’s question for National Journal’s Energy Insiders: Energy Insiders Weekly Question: Environmentalists are fuming over Obama’s trade deal. A slate of green groups say that the pact known as the Trans-Pacific Partnership could undermine key environmental safeguards, lead to increased natural gas exports, and boost fracking and coal. The White House counters, saying the deal contains extensive conservation protections that would curb illegal fishing, logging, and wildlife-trafficking and defending the deal as good for the economy overall. How would Obama’s trade deal impact energy and the environment? What are the potential risks and rewards of the deal, and what is the chance that it could reshape energy and environmental policy at home and abroad? Margo Thorning response:  It is unfortunate that environmentalists are shooting their own agenda in the foot through opposition to the Trans-Pacific Partnership deal. International trade is a critical ingredient to economic growth. See more in ACCF’s recent op-ed in The Hill (http://accf.org/we-need-trade-…. Research also shows that in the long run, as countries prosper, their environment improves as they look forward to cleaner, more efficient forms of technology and energy. One example of this is the broadened global use of liquefied natural gas (LNG).…

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U.S. INDC to United Nations Raises Many Questions; U.S. CO2 Reductions Should Be Based on Cost/Benefit Analysis

Washington, DC – The U.S. Intended Nationally Determined Contribution (INDC) to the United Nations Framework Convention on Climate Change (UNFCCC) raises many questions related to international commitments and concerns over the impact on the U.S. economy. Cost/benefit analysis should guide any policy related to climate change., according to American Council for American Council for Capital Formation Senior Vice President and Chief Economist Margo Thorning. Thorning offered her views today at a hearing of the U.S. House Committee on Science, Space and Technology. Thorning questioned the likelihood of reduced fossil fuel generation in exchange for more expensive renewable energy sources in many developing nations at the same time that global energy demand is projected to grow by 37 percent by 2040. She also pointed to the challenge for the U.S. to reach previously announced emission targets by 2020 that were even lower than those proposed in the INDC. Last, how will implementation of regulations to achieve those targets impact the U.S. economy? “Policymakers need to balance environmental goals with the need to promote strong economic growth. They must consider the potential impact of regulations implementing the INDC since the U.S. economic recovery remains weak. Real GDP growth has averaged only 1.1…

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Low Oil Prices and Impact on the Oil Industry

After several years of relative price stability, the oil markets sailed into a perfect storm in the second half of 2014. High growth in supplies met with low growth in demand. Global oil supply was supported by production from U.S. tight oil plays, which exceeded 4 million barrels per day in 2014 — barrels that were not being produced in any large volumes just five years ago. In addition, Libyan supplies returned to the market more quickly than anticipated, despite continued unrest within the country, adding yet more barrels to OPEC’s 30+ million barrels per day of output. And then negative data on economic growth from China, Europe and Japan triggered downward revisions to oil demand outlooks. The surplus of supply relative to demand on the world market then triggered a sharp drop in prices. The global benchmark Brent crude oil fell from an average price of $112 per barrel in June to less than $50 at the time of this writing. This 60 percent drop is approaching the severity of 2008’s 70 percent drop. The jolt to the markets is real. And past experience reveals that lower price levels tend to be accompanied by greater price volatility. The combination…

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