Despite a challenging market, the U.S. oil and gas industry is hanging tough. But our government’s inability to craft a sensible energy policy is at best handcuffing our producers and at worst threatening to reverse the gains of America’s shale revolution.
The U.S. oil rig count has dropped by more than one-half in less than a year, from slightly more than 1,600 last September to fewer than 700 in every week since early May of this year.
Oil prices, driven largely by a Saudi attempt to reassert control over the oil market, have fallen to below $40 per barrel and could slip further.
And yet the shale industry has not collapsed. In fact, production has remained steady, even growing in some places. Imports of foreign petroleum products have fallen to 25.4% of our domestic supply, a 44-year low.
These are not small gains.
No thanks to President Obama, we are approaching a level of energy security that lawmakers have promised but never delivered since the oil shocks of the 1970s.
Signs of a manufacturing renaissance are emerging along the Gulf Coast, where low-cost oil and natural gas have become magnets for energy-intensive industries.
American households, too, are saving thousands of dollars per year on lower prices at the pump and on lower heating and electricity bills.
Environmental benefits have also been noteworthy. Greater use of natural gas in place of coal for electricity generation has helped reduce U.S. carbon dioxide emissions in recent years to their lowest level in 20 years, making America the world leader in reducing carbon emissions.
Yet shale producers continue to face formidable political obstacles. The Obama administration, always happy to take credit for surging oil and natural gas production, is using the EPA and other regulatory bodies to burden energy companies with red tape and added costs.
Take the EPA’s landmark report on the safety of fracking. After years of research, the agency found what we already knew — that fracking is being done, and can continue to be done, safely.
And yet what did our domestic producers get from this?
New, onerous fracking rules for federal lands from the Interior Department.
The EPA followed those rules by proposing unnecessary regulations on methane emissions from oil and gas production.
The Obama administration and the EPA in particular seem intent on creating problems for our domestic oil and gas industry where there is none. According to the EPA’s own data, methane emissions have fallen 38%, while production has grown by 35% since 2005. The methane “problem” simply doesn’t cry out for new, expensive regulation.
If it’s not new rules hampering our energy companies, it’s missed opportunities to turn the page on outdated legislation like the ban on crude oil exports. It’s past time to lift the crude oil export ban, an outdated relic of misguided, reactionary energy policy from the 1970s.
The export ban’s continued existence is nonsensical. It weakens our commitment to free trade, plus creates market distortions that discourage domestic oil production, reducing our impact on global supply.
Those who argue that lifting the ban on oil exports would somehow weaken U.S. energy security fail to grasp that security is enhanced more by greater domestic production, and a more transparent marketplace, than by protectionism.
Half-measures designed to poke holes in the ban — like the recently announced fuel swaps with Mexico — aren’t enough. Let’s not add more government meddling to energy trade.
We need to modernize our energy policy for the 21st century to reflect America’s new status as a world energy superpower and lift the oil export ban altogether.
The shale revolution and its myriad economic, environmental and energy security benefits are fighting for their survival against the Saudis and OPEC, both of which are bent on regaining control of the oil trade.
As a counterweight, we need a U.S. energy policy and a regulatory approach that encourage our oil and gas producers.
Overzealous environmental regulation and inaction on the crude export ban are gifts from the Obama administration that Saudi Arabia, Russia and Venezuela don’t deserve.
Perry is a resident scholar at the American Enterprise Institute and a professor of economics at the Flint campus of the University of Michigan.
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