U.S. Oil And Natural Gas Fighting COVID-19

“U.S. total energy exports exceed imports in 2019 for the first time in 67 years,” U.S. Department of Energy, April 20, 2020

Let me start with a basic premise. Reliable, affordable, and reliability energy is the foundation of our COVID-19 mobilization: “To Fight The Coronavirus, The World Returns To Fossil Fuels.” Led by oil and natural gas, fossil fuels supply over 80% of the energy used here in the U.S. and around the world. The heroic nurses and doctors on the frontline are never, ever sick at sea, and the energy that fuels their fight cannot be either.

As COVID-19 has decimated demand, sunk prices, and disrupted supply chains around the world, all energy industries are struggling right now. But, never forget that our current situation is just that: a temporary calamity that will one day pass. For the U.S., what we are sure about is that our status as a global energy superpower is really just starting. While the shale revolution and the fracking boom since 2008 has easily made us the largest oil and gas producer, we are on pace to become the largest exporter of these essential fuels in just a few years.

The U.S. Department of Energy reports that U.S. exports in 2019 reached an all-time high of 23.6 quadrillion British thermal units (quads), marking the first time in 67 years that annual U.S. gross energy exports exceeded U.S. gross energy imports. Since 2010, exports of crude oil and products have nearly quadrupled (Figure 1). Last year, natural gas exports jumped 30% to almost 13 Bcf/d, continuing a five-year trend of annual increases (Figure 2). Even in recent weeks, perhaps the most challenging in the history of the U.S. oil and gas business, crude exports for the week ending April 10 hit above 3.4 million b/d – 13% more than their 2019 average.

To be sure, the very intervention of President Trump in the OPEC+ production cut deal demonstrates our growing role in global energy markets. The Trump administration has pursued a strategy of “energy dominance” to make us the superpower of oil and natural gas, two vital fuels that still supply over 60% of the world’s energy needs. The goal is to surge revenues, lower the trade deficit, and leverage the shale boom to grow the country’s geopolitical influence. From Asia to Latin America to even the heavily resourced Middle East, U.S. oil and gas is supplying all corners of the world. Importantly, this even includes Russia’s former monopolized markets in Europe. Released in December, Russia wants to globally deploy its grand Energy Strategy to 2035 for oil and gas hegemony.

It all makes perfect sense then: “Fiona Hill says that she heard Putin describe American fracking as a ‘great threat’ to Russia,” also explaining why Putin has been so aggressive negotiating with OPEC on production cuts and engaged Saudi Arabia for an oil price war.

The rise in U.S. LNG exports, for instance, is boosting trade by allowing more flexible contracts and hub-based pricing. This in turn is encouraging lower prices and expanding the import pool of nations. More gas, of course, is encouraged by the International Energy Agency because it helps lower greenhouse gas emissions and backups intermittent wind and solar power. President Trump clearly knows this critical importance of U.S. oil and gas nationally and around the world. But, the good news is that Joe Biden apparently realizes this as well, wisely now backing away from a “fracking ban” debate moment when he was caught up in against the anti-energy Bernie Sanders. Joe knows: “President Obama’s Support For America’s Shale Oil And Natural Gas.” Oil and gas exports themselves have long enjoyed bipartisan support, unfortunately something very rare these days.

The reality then is that our next president and congress must support the U.S. oil and gas business during these especially difficult times and beyond. I think it goes routinely understated just how much our competitors globally are supported by their governments, many of which either own them and/or leverage them for geopolitical gain. Oil and gas demand will surely rebound soon someday. We must remain ready not just to supply ourselves but also an energy-deprived world that must reduce dependence on Russia and OPEC. “How negative oil prices could set the stage for the next price boom.”

Indeed, do not see the current downturn as anything more than temporary. Every industry is being pushed to the brink right now. Just look at what is generally viewed as oil’s no-brainer “replacement.” Wood Mackenzie just projected that global electric car sales will plunge nearly 45% this year, already less convenient and far too expensive for most consumers. Thus, perfectly illustrating the overwhelming dominance of oil, 1.3 million electric car sales this year will be less than what Mexico’s car sales are in total.

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