The House of Representatives’ recent vote to end the 40-year-old ban on U.S. crude oil exports was a major step forward in countering Russia’s latest efforts to use energy as a power-grabbing tool.
Analysts seem to have overlooked an important result of Russia’s decision to prop up Syrian President Bashar al-Assad: It lays the ground work for creating a petroleum-exporting block, which could be used as leverage to promote a nefarious political agenda.
According to the International Energy Agency, while Saudi Arabia is the largest crude oil exporter, with an estimated 6.72 million barrels per day (mb/d), Russia comes in at a close second: an estimated 6.3 mb/d.
After years of neglecting its energy infrastructure, Iran’s crude oil production has been rising, to about 2.9 mb/d. And its exports stand at about 1.2 mb/d. However, now that President Obama has begun the sanctions-lifting process, Iran will increase its production and exports.
The third player in Russia’s new geo-energy game is Iraq. Baghdad has already reached out to Russia for help fighting ISIS. And Iraq appears open to more cooperative efforts, which no doubt could include energy production.
A year ago, Iraq was exporting about 2.5 mb/d of crude oil from its southern Basra area, and another 200,000 b/d from the Kurdish region. A more stable Iraq could produce much more.
And finally there’s Syria. Although the country produces very little oil today, a decade ago it produced about 500,000 b/d.
Combined, these countries export 10 mb/d today, about 50 percent over the Saudi’s current export level. And there is a lot of upside potential once Iranian sanctions are lifted.
These countries together span the heart of the Middle East. And with Russia as their new friend, they would fundamentally alter the region’s politics and energy industry.
And other countries could join. Egypt, which has been improving its diplomatic ties with Russia, is a minor crude oil producer, only about 600,000 b/d. But it has recently begun looking offshore, and has identified one of the largest natural gas reserves in the region.
If Russia were successful in initiating and exploiting an oil-exporting alliance, it could control much of the crude oil market. Many countries, including U.S. allies, might have to go to Russia to get oil.
Countering that development requires at least two steps. First, repeal the U.S. crude oil export ban. The House has taken that step, now the Senate should do likewise.
Critics claim that the U.S. is still importing oil, so what difference would ending the ban make?
The Energy Information Administration lists the U.S. as the largest producer of petroleum and other liquid products, besting Russia by more than 3 mb/d in 2014. Importantly, the EIA estimates that the U.S. will produce enough to meet its needs by 2020.
But establishing infrastructure and developing export contracts with other countries will take time, and no oil-producing company is going to move forward unless it knows that Washington will allow exports.
Second, the U.S. should form its own crude oil export alliance with Canada and Mexico. The EIA lists Canada as the world’s fifth largest crude oil producer, and Mexico holds 10th place.
Together, the three countries are producing about 21 million barrels per day. And while the U.S. isn’t producing more than it uses, the other countries are. A free-nation oil-exporting alliance could challenge a Russian-led Middle East block, and give our allies a viable energy alternative.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow at twitter.com/MerrillMatthews
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