Capital Corner

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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Lifting the restrictions on U.S. crude oil exports would lead to further increases in domestic oil production, result in lower gasoline prices and support millions of additional jobs, according to a comprehensive new study commissioned by the Energy Security Initiative (ESI) at Brookings in coordination with a macroeconomic study contracted from National Economic Research Associates (NERA) Economic Consulting. The production boom from shale plays across the country, such as North Dakota and Texas, have sparked serious debate on what we should do with our new energy reality of abundant crude oil supply. To shed light on how our Administration should move forward with this new abundant energy source, the ESI partnered with the National Economic Research Associates (NERA) to examine the economic and national security impacts of lifting the ban on crude oil exports. And their findings were clear: it is time to match our policies to our current energy landscape. Economically, the study found that lifting the ban on crude oil exports from the United States will boost economic growth, wages, employment, trade and overall welfare. Each scenario used in the study model – delaying lifting the ban until 2015, lifting the ban only on condensates or lifting the…

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This weeks’ topic on National Journal’s Energy Insiders: How Should Climate Change Be Taught? The battle over climate science in schools is heating up. Earlier this month, a coalition of national science-education advocates released a students bill of rights asserting that students across the country should be taught the scientific consensus on climate change. The consensus view held by 97 percent of scientists, according to reviews of the academic literature, holds that the planet is heating up and human activity is the primary cause. Currently, however, a patchwork of state science standards exist that do not mandate the consensus view is taught, leaving the door open for controversy over climate change to get equal airtime in many classrooms. My response: States should decide how best to teach issues like climate change and climate change policies. Like any important issue–evolution vs creationism, national defense and health care policy–it is critical that students understand all sides of the debate. It was an honor for me to help present an economic perspective on the climate change debate to a group of middle school students in Atlanta, Georgia. See more about this athttps://www.capitalcorner.org…. For instance, it’s important for students to understand that climate change is a global…

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The American Council for Capital Formation’s (ACCF) ActOnLNG campaign has launched a new video highlighting how important liquefied natural gas (LNG) exports are to revitalizing Main Street, powering key industries, and strengthening U.S. manufacturing.  The short video, narrated by former Congressman Harold Ford, Jr. (D-Tenn), also urges the Obama administration to speed up LNG export approvals.  The video complements efforts in Congress to boost LNG exports to America’s allies through legislation, including the Domestic Prosperity and Global Freedom Act (H.R. 6). “This video captures the sense of urgency that use needed to ensure that the United States continues to lead the world in the development of energy resources–particularly natural gas,” explained Dr. Margo Thorning, ACCF Chief Economist and Senior Vice President.  ”Exporting LNG would be a real game changer for the nation’s economy and would help America sustain its natural gas boom.  We hope this video will spark further conversation around natural gas exports–especially the need to cut through the bureaucratic red tape holding back development.”

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