Picture 2

Picture 2

Jan 1, 2016

Lifting US Oil Export Ban: Big Foreign Policy Win!

Many people think that lifting the US oil export ban was a hollow victory for Republicans in the Omnibus spending bill this year.  It looks hollow now, but it’s a big foreign policy win for the future.

Three of our most dangerous enemies, Russia, Iran and ISIS, finance their military and terrorist operations with oil sales.  Russia and Iran need a crude oil price of about $100 a barrel to maintain spending at current levels.  ISIS needs about $80 a barrel to be able to sell its smuggled oil at an attractive discount.  With European benchmark crude selling for about $37 a barrel, all three are really hurting financially.

In the US, most oil production uses ever improving fracking technology. Fracking injects a solution of water, sand and secret ingredients under pressure to fracture rock formations that contain oil and natural gas.  Fracking technology can ramp up production much more quickly than ordinary drilling.  When the price of oil is low, you stop injecting.  When the price goes up, you resume injecting.  Break even for US fracking operations is somewhere between $45 and $60 a barrel.

Lifting the US oil export ban means that Russia, Iran and ISIS will not see an oil price above $60 in the next 5-10 years.  They will be financially incapable of continuing their aggressive violent strategies.  The last time oil prices were this low, inflation in Russia topped 80% a year, Russia defaulted on its government bonds and Boris Yeltsin was forced out of power.  Prolonged financial difficulty may destabilize three of our most dangerous enemies, based on a concession the Democrats didn’t think was worth anything.

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