American Oil and Gas Reporter - May 2015 - 151

It Is Time To End Ban On Crude Exports
By Congressman Steve Pearce

WASHINGTON-Perhaps no other
state in the nation has a bigger stake in robust oil and gas production than New Mexico. But that stake is at serious risk because
of the inability of our state's oil producers to find enough customers to buy their
now abundant supply.
The reason is that in the 1970s, during
the Arab oil embargo that ignited a U.S.
energy crisis, Congress enacted laws prohibiting domestic crude oil from being exported. The export ban is still on the books
and continues to forbid American job creators from exporting their product.
Oil and gas production is the lifeblood of
New Mexico's economy: 69,000 jobs-9 percent of all New Mexican employment-are
tied to oil and gas development. In 2013, state
taxes generated by oil and gas accounted for
31.5 percent of the state's general fund and
were directly responsible for paying for 85
percent of the state's capital projects.
In 2014, oil and gas generated $726 million for schools, universities and public hospitals in New Mexico. Cities, counties and
Native American tribal governments rely
on oil and gas property tax assessments. In
2013, $835 million in royalties was sent to
Washington for oil and gas produced on
federal lands in New Mexico.
With improvements in technology,
such as hydraulic fracturing, the United
States has entered a new age of energy
abundance. America is now number one
in the world in oil production, surpassing
Saudi Arabia and Russia. New Mexico has
contributed heavily to this growth.
This historic expansion comes at a time
when the world is awash with surplus oil,

plunging the global price of oil from
$115 last June to a low of around $55 in
mid-March.
The antiquated export ban is making matters even worse for New Mexico and other U.S. oil producers by preventing them
from finding buyers abroad for the surplus
reserves that U.S. refiners cannot process.
The effect of allowing only U.S. customers
to buy American crude is that it further cuts
the price U.S. producers receive-even below the severely depressed world price.
New Mexico producers cannot afford
to continue to invest in new drilling projects. Rigs are being laid down and the spinoff gains for New Mexico are weakening.
Specifically, the export ban translates
into lost jobs, lost taxes, and decreased royalties; all of which have heavy consequences for New Mexico.
Beyond its economic value to our
state and nation, allowing international allies to buy U.S. oil advances our national security interest. As we develop closer
economic ties, our trade partners become
better geopolitical allies. The world wants
to buy U.S. oil; our international allies and
trade partners want to look to the United
States for their energy security.
President Obama has agreed with all
these concepts. In his 2010 State of the
Union Address, the president told Americans, "We will double our exports over the
next five years, an increase that will support 2 million jobs in America."
As his remarks make clear, the administration publicly touts expanding trade to
create jobs. I agree with the president on
this point. That is why it's time for Washington to remove export barriers and stick
a "made in America" sale tag on New

Mexico's abundant oil and gas reserves.
Since the 1970s, the president has had
the statutory authority to change this policy on his own. Likewise, if the president
does not act, the Congress can remove the
prohibition. Either way, it is time to lift the
destructive crude oil export ban. Washington should deliver this win-win for the nation and New Mexico.
Ì

Editor's Note: The preceding article
is being published at the request of the
New Mexico Oil & Gas Association.

STEVE
PEARCE

Congressman Steve Pearce was first
elected to represent New Mexico's 2nd
Congressional District in 2002. In 2008,
he campaigned unsuccessfully for the
U.S. Senate seat held by the retiring Pete
Domenici, but was re-elected to the
House of Representatives in 2010. Pearce
and his wife, Cynthia, owned and operated Lea Fishing Tools, an oil field
service company in Hobbs, N.M. Pearce
served as a pilot during the Vietnam War,
logging 518 hours of combat flight. He
has a bachelor's in economics from
New Mexico University and an M.B.A.
from Eastern New Mexico University.

U.S. LTO Upends Oil Balance, IEA Says
LONDON-Unlike earlier periods of declining oil prices, the International Energy Agency says the current downtown is
both supply- and demand-driven. The
agency points to record non-OPEC supply
growth in 2014 and unexpectedly weak demand growth as two significant factors behind the drop.
In its latest Medium-Term Oil Market
Report, IEA points to U.S. light, tight oil
(LTO) extraction technologies, which at
the time of the previous market correction
barely registered as a source of production,
as having unlocked a huge resource that
long seemed off limits. LTO has profoundly upended the traditional division of labor between the Organization of Petrole-

um Exporting Countries and non-OPEC
producers, the agency says.
The dynamics of global demand and
oil's place in the fuel mix are undergoing
dramatic changes, IEA indicates. It says
emerging economies that 10 years ago
seemed an unstoppable engine of near-vertical demand growth-China chief among
them-have entered a new, less-intensive
state of development. The global economy, which has been reshaped by the information technology revolution, generally
has become less fuel-intensive, the Report
states, and concerns about climate change
are recasting energy policies.
The globalization of the natural gas
market, coupled with steep reductions in the

costs and availability of renewable energy,
also are causing oil to face a level of interfuel competition that would have seemed unfathomable a few years ago, IEA observes.
IEA asserts that the oil price collapse
that has shaken global markets since June
was neither wholly unexpected nor unprecedented.
It was not unexpected because earlier
IEA reports pointed to a looming surge in
OPEC's implied spare capacity, which
IEA holds was an expression of the supply/demand imbalance that would emerge
if the producer group, faced with increasing North American supply, held production above the call on OPEC production
and stock change. It was not unprecedentMAY 2015 151

American Oil and Gas Reporter - May 2015

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