By Alex Mills
AUSTIN, Texas (Texas Insider Report) – Four decades ago, some members of the Organization of Petroleum Exporting Countries – more commonly known as OPEC – made it clear that they did not like the foreign policy of the United States of America.
If the U.S. was going to support Israel, it was going to have to pay. Crude oil imports were reduced, prices rose, lines appeared at gasoline stations, and people got mad. America’s vulnerability to crude oil imports became a reality.
It was the first time the “oil weapon” had been used, and the impact on the economy and national security was devastating.
The federal government acted, but for the most part their actions were detrimental. Price controls were placed on crude oil, and a ban was placed on crude oil exports from the U.S. Price controls were eventually lifted, but the ban on exports still remains.
Now is the time to lift the ban, because the “U.S. faces a startling array of global security threats, demanding national resolve and the resolve of our closest allies in Europe and Asia,” according to a column in the May 20 edition of The Wall Street Journal authored by Leon Panetta (at right,) former Secretary of Defense to President Obama, and Stephen Hadley, who served as nation security adviser to President George W. Bush.
Panetta and Hadley point out that serious problems exist as Iran tries to become a regional power, Russia’s aggression in Ukraine and Europe, and Islamic terrorism in the Middle East and Africa.
A key component of achieving the nation’s goals is by strengthening the energy and economic viability of the U.S. and our allies, they stated.
“The moment has come for the U.S. to deploy its oil and gas in support of its security interests around the world.”
Panetta and Hadley noted that Russia’s stranglehold on Europe is real.
“Fourteen NATO countries buy 15 percent or more of their oil from Russia, with several countries in Eastern and Central Europe exceeding 50 percent. Russia is the sole or predominant source of natural gas for several European countries including Finland, Slovakia, Bulgaria and the Baltic States. Europe as a whole relies on Russia for more than a quarter of its natural gas.”
They pointed out that in 2009 Russia cut off natural gas to Ukraine, and several European countries completely lost their gas supply.
“Further, revenue from sales to Europe provides Russia with considerable financial resources to fund its aggression in Ukraine,” Panetta and Hadley stated.
“That conflict could conceivably spread through Central Europe to the Baltic states. So far, the trans-Atlantic alliance had held firm, but the trajectory of this conflict is unpredictable. The U.S. can provide friends and allies with a stable alternative to threats of supply disruption.
“This is a strategic imperative as well as a matter of economic self-interest.”
Panetta and Hadley believe that the fear of rising gasoline prices if the ban on oil exports is lifted is misplaced.
“The U.S. already exports refined petroleum, including 875,000 barrels a day of gasoline in December 2014,” they noted.
“The result is that U.S. gasoline prices approximate the world price.
“Several recent studies including by the Brookings Institute, Resources for the Future and Rice University’s Center for Energy Studies, demonstrate that crude oil exports would actually put downward pressure on U.S. gasoline prices, as more oil supply hits the global market and lowers global prices.”
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely those of the author.