OBAMA ADMINISTRATION FAILS TO FREE OIL FOR EXPORT
Last week Russia’s gas monopoly, Gazprom, under orders from Vladimir Putin, raised the price of 1,000 cubic meters of gas from $286.50 to $385.50. Gazprom aims to cripple the already depressed Ukrainian economy and exact a penalty against Europe for opposing Putin’s invasion of the Ukraine. The United States could resolve the problem and turn the tables on Putin by replacing Russia as a source of oil, but President Obama refuses to take the necessary steps.
The Ukraine is teetering on the brink of bankruptcy. It will be hard hit by these and other financial penalties that Russia is imposing on the country. The move to hike gas prices appears designed to render even more unstable the already contentious political environment present in the Ukraine. The dramatic escalation in gas prices raises the prospect of consumer revolts which would further weaken the Ukrainian regime and economy. Household gas prices are likely to rise by 50 percent in May.
In Europe, about one-third of natural gas is imported from Russia. In the past Russia has used gas supply to Europe as a lever to exact political concessions. The Daily Caller reports that over the last decade Putin has cut off gas supplies to the Ukraine, through which most Russian gas reaches Europe, for several days at a time. In January of 2009, Putin cut off the gas supply for 22 days.
There is a steep downside for Putin in his use of gas as a geopolitical weapon. Revenues from oil and gas exports make up about 40 percent of Russia’s budget. About 84 percent of Russian oil and 70 percent of Russian gas exports are to Europe. Given these facts, it is shocking in the extreme that President Obama is not joining with Congress immediately to make it a national priority to eliminate all barriers to U.S. oil and gas exports to the Ukraine and Europe.
The Obama Administration regularly rejects or delays applications for drilling on federal lands and in the U.S. coastal waterways. It likewise stands in the way of fracking to extract oil from previously unavailable sources. The Obama Administration has also imposed a ban on crude oil and natural gas exports. If that ban were removed, U.S. production for export would increase dramatically. An estimated production of between 5 and 10 billion cubic feet per day is possible and would help alleviate European dependency on Russian oil, significantly cutting into the Russian market.
The Department of Energy routinely blocks applications for export to other countries. Over the last four years, the Secretary of Energy has approved only a half dozen applications, while failing to act on two dozen more.
Several members of Congress have introduced legislation to eliminate in part or whole federal restrictions now blocking U.S. exports of oil and gas to Europe and the Ukraine. Representative Ted Poe of Texas and Senator Mark Udall of Colorado have introduced legislation to expand U.S. exports by removing regulatory barriers to production.
Very shortly now, this opportunity if not taken will be lost as Europe turns to others in a scramble to replace Russian supplied oil and natural gas. The long term economic losses to the United States of not exploiting this opportunity are enormous. Nevertheless, given Obama’s penchant for acting slowly and indecisively in the face of international crises, along with his strong ties to environmental lobbies, chances are better than even that he will do nothing to reduce regulatory constraints on the American oil and gas markets.
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