x Abu Dhabi, UAESaturday 22 July 2017

Oil export ban and big imports expose US energy hypocrisy

Minimal petrol taxation and lack of climate policy contribute to American greenhouse gas emissions and energy use per person being among the world's highest, while it limits exploration at home and asks others to cut emissions. The country must solve its contradictions, writes Robin Mills.

Ships bringing oil drilling equipment to Alaska, left, pass through Elliott Bay in Seattle. Donna Gordon Blankinship / AP Photo
Ships bringing oil drilling equipment to Alaska, left, pass through Elliott Bay in Seattle. Donna Gordon Blankinship / AP Photo

North Carolina is a verdant state with long, sandy beaches. Its humid summers make air conditioning desirable: in fact, its 10 million people use more electricity than Indonesia's 237 million.

"North Carolina is unique of all the states," says Daniel Fine of the New Mexico Center for Energy Policy, "of having potential natural gas but having prohibited it". Onshore shale gas exploration is banned, and drilling off North Carolina's shores has been forbidden since 1990. Last year, the governor vetoed an offshore drilling law.

North Carolina is thus a microcosm of a long-standing inconsistency in the United States' approach to energy: voracious consumption combined with restrictions on production. The assumption is that others, less squeamish about the environment, will make up the difference.

Minimal petrol taxation and lack of climate policy contribute to American greenhouse gas emissions and energy use per person being among the world's highest. Yet the former president George W Bush cited the lack of restrictions on China for the US's refusal to sign up to international deals aimed at limiting global warming. The average American produces almost three times the carbon dioxide of the typical Chinese.

Like North Carolina among American states, the US is unique in the world. It has unparalleled restrictions on offshore oil and gas exploration: forbidden off the entire Atlantic and Pacific coasts, and in the eastern Gulf of Mexico. This summer, the US may finally take the significant step of resuming drilling in the Chukchi and Beaufort seas, north of Alaska.

Shell was granted the licences in 2005, but had to endure seven years of environmental and regulatory opposition.

These restrictions seem self-indulgent, given that nations with strict environmental standards, such as Norway and Australia, permit petroleum exploitation in most of their marine areas.

With the US's onshore oil and gas production surging as a result of the shale revolution, offshore drilling suddenly seems less vital. Now a second cognitive dissonance has sounded - a challenge to purported American free-market principles.

The US has lobbied extensively for pipelines to connect landlocked Central Asia to world markets, avoiding Russian and Chinese territory. Yet when it comes to similarly landlocked Alberta, the planned Keystone XL pipeline has been trapped in a politicised process of approvals and environmental opposition. In a remarkable irony, Canada may have to build a pipeline to the Pacific to access Chinese markets.

In 2008, the US House of Representatives passed an anti-Opec bill, making it illegal for foreign states "to act collectively" to limit oil production or export. The bill fell foul of a Senate filibuster and a threatened presidential veto. At that point, the Los Angeles Times opined, "free enterprise … ought to be the norm for producing oil".

When oil prices were high in February this year, the former presidential candidate John Kerry demanded that President Barack Obama "jawbone Opec to lower the price now".

The administration has relied on higher production from the GCC to support its sanctions campaign against Iran.

But now the US is itself considering acting as a mini-Opec. The country has what must be a unique prohibition - it does not allow crude oil exports. Not Hugo Chávez's Venezuela, Leonid Brezhnev's Soviet Union or Ayatollah Khomeini's Iran enacted such a ban.

Similarly, with natural gas prices at record lows, there is considerable domestic opposition to gas exports, even though they would go to allies such as earthquake-struck Japan. The billionaire oil man T Boone Pickenssaid that if the US permitted hydrocarbon exports, "we're truly going to go down as the dumbest generation".

Yet perhaps a dumber move would be for the US to fail to tackle the contradictions in its energy policy, which undermine economic and environmental goals at home and create the impression of hypocrisy abroad.

Robin Mills is the head of consulting at Manaar Energy and the author of The Myth of the Oil Crisis and Capturing Carbon