Our Days As An Oil Exporter Are Limited, And So Are Dreams Of Energy Independence

Loren Steffy, UH Energy Scholar

On New Year’s Eve, 2015, a tanker laden with West Texas crude slipped out of Corpus Christi, Texas, headed for Germany — the first such shipment after the Obama administration lifted a 40-year ban on oil exports. Five years later, the U.S. became a net exporter of oil for the first time since at least 1949.

Oil exports were hailed by government and industry executives alike as a major step toward America’s energy independence. But we’ve learned the hard way that exports don’t make us independent. In the past month, Vladimir Putin has put an exclamation mark on that point.

Last year, on average we exported 8.6 million barrels a day, but we imported 8.5 million from countries such as Canada, Mexico and, yes, Russia.

Far from making us independent, our rise from foreign oil dependency to one of the world’s biggest producers in less than two decades made the global energy market even more interconnected than it was before. The advantages are more than just economic.

While we tend to think of all refined oil products as bad for the environment, the system that’s emerged is better than when every country refined its own oil. For example, U.S. refiners are calibrated for heavy sour crude from places like Venezuela and Canada. The crude we produce in places like West Texas is primary light sweet crude. We export that to countries who are less able to refine heavier oil.

Our domestic refiners take some of the world’s dirtiest oil, clean it up, and produce some of the cleanest gasoline. Refiners in other countries, meanwhile, take our cleaner crude refine that. That’s contributed to a decline in overall vehicle emissions back to 2015 levels, and it will become even more important as the number of vehicles increases by about 2 percent through 2030.

But this energy interdependence only gets us so far.

The challenge is that we need an energy policy that both encourages short-term supplies of oil, natural gas and gasoline, while also directing us towards a cleaner energy future. Had we had such a policy 30 years ago, we would be in a different place today.

Instead, we have spent decades zig-zagging between reactionary policies, often in response to political whims—“all the above,” “drill baby drill,” “energy dominance,” “the Green New Deal.” All of these plans are more agenda-driven sloganeering than meaningful energy policy.

Despite political pandering to the contrary, we were never close to being energy independent. The Biden administration was caught flat-footed by Putin’s invasion of Ukraine, having spent its first year in office driving its green agenda without regard for rising fossil fuel demand as people emerged from the pandemic lockdowns. President Biden spoke what many wanted to hear, but he failed to mention what we need.

Trump promised dominance, Biden promised freedom from oil, and Putin undermined them both by exploiting the political carping that drowns out meaningful strategy.

After I wrote that Biden should reopen oil talks with Venezuela and Iran, a family member sent me a link to a story about missile strikes on the U.S. consulate in northern Iraq that apparently were launched from Iran. The incident was part of the reason we shouldn’t buy oil from Iran, he argued. It’s a valid point. But the Saudi Arabian royal family has been implicated in killing an American journalist and just oversaw one of the largest mass executions in the kingdom’s history. And the talks with Venezuela focus on lifting sanctions we imposed because of human rights violations by the Maduro regime there. The exploitation of oil tends to destabilize emerging economies and breed corruption. When you consider the long list of bad actors or corrupt regimes on our import list, few emerge with clean hands.

And despite our net exporter status, oil production is likely to become more concentrated in unclean hands in the future. No matter what we do to encouraging domestic production, oil companies know demand for their product is waning globally. BP’s annual energy outlook notes that even if oil demand remains above pre-pandemic levels until 2030, it will fall by about 20 million barrels a day by 2050. If net zero promises pan out, it could be as much as 75 million barrels. The result is that the production needed to meet that lower demand will increasingly be dominated by the low-cost producers in OPEC.

In other words, our days as an exporter are limited and will subside as the energy transition now underway takes hold, even if our domestic production rises in the short-term.

That transition, however, won’t make us energy independent, either. Electric vehicles will play a critical role in meeting the International Energy Agency’s goals for reducing carbon emissions by 2050. But that means we’ll need about 30 times more minerals such a nickel, cobalt, lithium, granite and manganese—at least based on current battery technology.

Australia produces 48 percent of the world’s lithium, while China accounts for more than two-thirds of the global graphite supply. Sixty-nine percent of all cobalt comes from the Democratic Republic of the Congo. Russia and North Korea are major producers of magnesium.

In other words, EVs are likely to create a different kind of foreign energy dependence. We have, as my colleague Emily Pickrell wrote recently, large and untapped supplies of many of these minerals in the U.S., but so far the Biden administration’s plans for expanding EVs hinges on importing battery materials.

Now more than ever we need a comprehensive plan that ensures short-term energy security while also moving us toward a clean energy future and maintaining the flexibility to incorporate innovation. That’s a tall order, of course, but any plan should include:

— Incentives for domestic drilling for oil and natural gas. While it works against the long-term goals for combating climate change, but as Putin has reminded us, we must protect our economy from short-term price shocks. It’s hard to develop new energy technology in a recession.

— Increased development for existing programs. Nuclear power in the U.S. has been stagnant for years, but it’s a proven technology that can be used to reduce carbon emissions. We need to encourage the development of smaller, cheaper reactors that can provide cheap and stable generation for a power grid that desperately needs it. We need a strategy to address the issue of spent fuel rather than just kicking the can down the road.

— Meanwhile, we must continue subsidizing wind and solar power regardless of what oil and gas prices do in the short term. Renewables will play a growing role in power generation, especially if large-scale battery storage becomes available. And, as I’ve mentioned this before, we need to continue development of “green” hydrogen, made from the electrolysis of water, which could be critical in achieving our carbon-reduction goals. Right now, it’s too expensive to be practical.

— Ongoing incentives for EVs. A new wave of electric vehicles are on their way to market. As more consumers get comfortable with the technology and see how much they can save on gasoline and maintenance, demand is likely to grow. But right now, most EVs are still too expensive for many consumers.

— Improving domestic energy supply chains. This includes more pipelines. While they may be unpopular, they are the safest way to move liquid fuels around the country, which can reduce regional price disparities. But we also need incentives for domestic production of rare-earth minerals for battery production.

— Promoting conservation. Americans hate the c-word, and they hate being inconvenienced, but there are things we can do right now to cut our oil and electricity consumption. Diversity of resources and increased production are great, but conservation is the most affordable and easily implemented weapon we have against rising prices. We need to get smarter about how we use energy.

Energy independence may have been a political fantasy, but Russia’s invasion of Ukraine serves to remind us that we have dithered too long with one-sided agendas. We need to take a holistic approach to securing our energy supplies and a cleaner energy future — one that deals with the reality of the present while keeping an eye on where we need to go in the future.

Loren Steffy is a writer-at-large for Texas Monthly, an executive producer for Rational Middle Media and a managing director for 30 Point Strategies, where he heads the 30 Point Press publishing imprint. He is the author of five nonfiction books: “Deconstructed: An Insider’s View of Illegal Immigration and the Building Trades” (with Stan Marek), “The Last Trial of T. Boone Pickens” (with Chrysta Castañeda), “George P. Mitchell: Fracking, Sustainability, and an Unorthodox Quest to Save the Planet, The Man Who Thought Like a Ship,” and “Drowning in Oil: BP and the Reckless Pursuit of of Profit.” His first novel, “The Big Empty,” was published in May 2021.

Steffy is the former business columnist for the Houston Chronicle and previously was the Dallas (and Houston) bureau chief and a senior writer for Bloomberg News. His award-winning writing has been published in newspapers and other publications worldwide. He has a bachelor’s degree in journalism from Texas A&M University.

UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.