Speaking at an economic forum in June, President Joe Biden said Russia’s brutal and unprovoked attack on Ukraine had sparked a global crisis that has refocused attention on the need for energy stability and security. He noted that, “In the United States, I’m using every lever available to me to bring down prices for the American people.”
Yet long before Russia’s attack, several alarming trends were well underway that contributed to the underinvestment in oil and natural gas development and increased the sizable gap between energy supply and demand as markets rebounded from the pandemic.
Far from using “every lever available” to lower prices or increase energy supply, the White House appears headed in the opposite direction. Three policies the administration is considering as part of an “emergency” action threaten to intensify the situation and should be scrapped.
First, the Biden administration should reject the idea of a ban on oil and gas leasing on federal lands and waters and immediately commit to a robust leasing plan for oil and gas development in the Gulf of Mexico. The American Petroleum Institute (API), along with the National Ocean Industries Association (NOIA), recently conducted a study by Energy and Industry Advisory Partners that found that a delay in Gulf of Mexico leasing could result in reducing U.S. oil and gas production by nearly 500,000 barrels per day between 2022 and 2040 and cost approximately 60,000 U.S. jobs.
In addition to the lost jobs and reduced energy supply, banning leasing in the Gulf could eventually jeopardize significant revenues that flow to the Land and Water Conservation Fund (LWCF), our nation’s most important federal program supporting the conservation of our nation’s parks, forests, coastal areas, and wildlife refuges. The LWCF provides critical conservation funding in every state totaling more than $40 billion from oil and gas development.
Second, the Biden administration should affirm its commitment to energy exports and specifically reject the idea of a ban on the export of refined petroleum products. U.S. energy exports have played a critical role in increasing supply and strengthening U.S. energy and national security. Additionally, they have been critical in supporting our allies during this current energy crisis. An export ban on refined petroleum products, such as gasoline and distillate, could have unintended consequences and negatively impact consumers, the economy, and the refining sector.
A recent study by American Council on Capital Formation (ACCF) reports that a petroleum product export ban would likely trap refinery production in the Gulf Coast region, resulting in shuttered capacity of about 1.3 million barrels per day. The study also notes that the loss of U.S. refinery product exports could result in reduced global supply and increased global market prices. Such a move could cause U.S. GDP to decline by more than $44 billion in 2023 and cause job losses of an average of 85,000 during the second half of 2022, according to ACCF.
Third, the Biden administration should protect America’s ability to export crude oil, which was put in place by bipartisan legislation signed by President Obama in 2015. Since the crude oil export ban was lifted, American energy security has been significantly enhanced. A recent ICF study commissioned by API and the American Exploration and Production Council (AXPC) found that, as a result of lifting the crude oil export ban, the United States has lowered gasoline prices and increased crude production by 1.8 billion barrels, reducing global oil prices and increasing U.S. employment by an average of 48,000 jobs.
Reimposing the U.S. crude export ban would likely lead to lower crude oil and natural gas production while increasing our nation’s U.S. trade deficit. Even worse, lowering U.S. crude production could reduce total global oil supply and put upward pressure on global oil prices — the very thing the Biden administration is trying to alleviate.
In a recent opinion column, historian Daniel Yergin warned the current energy crisis could deepen. He proposed more “informed collaboration between government and the industry that manages the energy flows on which modern economies depend.” Yergin is correct and policymakers everywhere should pay heed. Sometimes, using “every lever available” includes the simple act of listening.
The solution to alleviating this crisis lies right under our feet. API recently released a 10-point plan to work with Congress and the Biden administration to increase U.S. oil and natural gas production and eliminate the barriers to infrastructure development. Solving the supply crisis will be no easy task for Washington, but restrictions on leasing and export bans are not the answer and will only make the problem worse.
Frank Macchiarola is Senior Vice President of Policy, Economics and Regulatory Affairs at the American Petroleum Institute. Anne Bradbury is CEO of the American Exploration and Production Council, which represents the largest upstream independent producers of oil and natural gas in the United States. This piece originally ran at RealClearEnergy.
