Senate Committee on Foreign Relations

Hearing on American Energy Exports

6/23/15

The Subcommittee on Multilateral International Development, Multiple Institutions, And International Economic Energy, And Environmental Policy met to discuss future energy policy regarding crude oil and the effects it could potentially have on foreign relations in matters of national defense and global economic stability. It was noted by presiding Sen. Barrasso in the opening remarks that the U.S. is the world’s largest oil and natural producer and has the potential to help allies, create jobs and ensure national security. It should be a priority to end dependence on Iran, Russia and Venezuela and it was noted that allies of the U.S. import 80% of oil from Russia. It was recalled that in July, 2014 Ukrainian President Poroshenko asked the U.S. to help so Ukraine could not be blackmailed by Moscow. It was said to be of paramount importance to strengthen foreign policy leadership.

Senator Udall called for more jobs in New Mexico and Wyoming and the need to keep prices stable, and ensure that the military can respond to conflict anywhere in the world. He questioned how new policy would impact national security and sought to ascertain who has the refining capacity for crude exports as well as whether U.S. exports would improve or damage the environment.

The first witness, Mr. Robert McNally of the Rapidan Group recalled that in World War II the U.S. supplied 6 out of every 7 barrels of oil used by the allies. He noted that the U.S. is the world’s largest oil producer. Mr. McNally emphasized the need to preserve and protect supply diversity and reduce oil price volatility to help achieve national security priorities. He recalled the words of Sen. Murkowski, “We should not lift sanctions on Iranian oil, while keeping sanctions on U.S. oil.”

The next witness, Dr. David Gordon called for the need to streamline and speed up the process of exporting. He noted the correlation between enhanced energy exports and enhanced potential for U.S. security goals. He asserted that it was an important strategic act to lift sanctions on U.S. oil and uphold those imposed on Iran. He expressed hope that China could view the U.S. as an attractive economic partner. Allies of the U.S. could be unwilling to participate in sanctions on oil for hostile countries unless the U.S. offers them an alternative.

The third witness, Mr. Jamie Webster from HIS Energy, noted that free trade has changed the flow of oils. He called for liberalization of U.S. oil exports. He recalled that in 2010 the U.S. imported 1.1 million barrels a day from Nigeria and now exports more than 2 million barrels of oil every day. Mr. Webster asserted that a liberal trade policy for crude oil would lead to a lower price which would be better for consumers and create jobs. He noted that the crude oil ban hurts U.S. consumers and that the U.S. has spent $85 billion in the last 25 years to process and refine foreign oil. Out of the 140 refineries in the U.S. most in the Gulf of Mexico can handle “heavy”, crude oil.

The final witness, retired Navy commander Kirk S. Lippold of Lippold Strategies noted that he spent 26 years in the Navy to protect national security interests. The U.S. must ensure the safe transport of oil while at sea. He asserted that the U.S. is still overly dependent on foreign oil. In 2014 the U.S. had 2.6 billion barrels of foreign oil imported, a total of 30% of the U.S. oil supply. He asserted that lifting the crude oil ban would most benefit China. The U.S. needs to produce more of its own supply. Mr. Lippold noted that Boko Haram controls much of Nigeria, a country whose economy is greatly dependent on oil. They need refined oil, not crude oil. We import the same amount of foreign oil as before regulations even though we now produce more domestically.

Mr. McNally then inveighed that the U.S. should not lift sanctions on Iran or import oil there unless an acceptable nuclear arms agreement is reached. Senator Barrasso questioned Dr. Gordon how dependence on Russian oil has hampered national security initiatives. Dr. Gordon responded that loosening restrictions on U.S. oil would enable European countries to tighten restrictions on Russia. Dr. Gordon was then questioned as to how energy exports can help energy allies in the Far East to which he responded that Asian countries see direct benefit in energy security by a stable supply as opposed to a supply from the Middle East. He noted that if China is more dependent on the U.S. it strengthens our national security.

Senator Udall then questioned Mr. Webster as to the negative economic effects of continuing a ban on crude oil. Mr. Webster responded that if crude oil is not exported the amount of oil that needs to be processed will overwhelm the capacity of refineries. Mr. Lippold was then questioned if U.S. troops are at risk because of U.S. dependence on foreign crude oil. Mr. Lippold responded that the U.S. imports 7 million barrels of oil a day and called for a national security policy to be enacted before the crude oil ban is lifted. Mr. Lippold identified the Straits Hormuz and Malacca as areas meriting special security considerations.

–Stephen Shaw (6/23/15)