Over the weekend The New York Times published what could very well be the dumbest column Thomas Friedman has ever written. I know, I know… How could that be possible after the incredibly wrong things he wrote about the U.S. invasion of Iraq? Let’s start with the premise.
…[T]he necessary impactful thing that America should do at home now is for the president and Congress to lift our self-imposed ban on U.S. oil exports, which would significantly dent the global high price of crude oil. And combine that with long overdue comprehensive tax reform [a carbon tax] that finally values our environment and security.
If the price of oil plummets to just $75 to $85 a barrel from $100 by lifting the ban, and we have implemented tax reform that signals our commitment to clean growth, we inevitably weaken Putin and ISIS, strengthen America and show the world that we deserve to lead because we’re back to doing big, hard things at home that once again differentiate us.
The oxymoronic logic displayed here is so dizzyingly self-contradictory that I had to re-read it three times in the vain attempt to find the hidden rationale that would turn the apparently nonsensical into the brilliant. Maybe it was written in invisible ink. Let’s see if we can count the contradictions:
- Promoting oil drilling and exports while instituting a carbon tax.
- Oil prices would go down despite a tax on carbon.
- Lifting the oil export ban would increase U.S. security.
If I shared those three claims with my eight year old son, he would scratch his head and ask me if I had drunk some alcohol.
The truth is that Friedman’s logic is more bent than a pretzel. If we were serious in this country about tackling the climate crisis then why would we incentivize further oil and natural gas drilling? I know that this “all of the above” strategy has been President Obama’s energy policy but that doesn’t make it right.
And how in the world would oil prices go down as a result of a lifting of the oil export ban if the government were to also implement a carbon tax? If the tax was levied upstream, on the fossil fuel companies, then prices could only go up—for U.S. and international consumers alike. The only question would be by how much. If the tax was levied downstream, at the point of consumption, then prices would go up for U.S. consumers. That may make oil relatively cheaper for international consumers, but how exactly would that improve American energy security?
Even if the oil export ban was lifted without a concurrent carbon tax, it’s doubtful that global oil prices would go down significantly. It may make a temporary difference for international consumers but only at the cost of raising domestic oil prices. And if Brent prices did go down as a result of a lifting of the oil export ban, it’s very likely that this would be fleeting.
All this talk of oil exports is based on a recent resurgence of U.S. oil production thanks to a breathtaking increase in hydraulic fracturing and horizontal drilling (“fracking”) in unconventional tight oil plays. The issue with tight oil (and similarly with shale gas, which is extracted in the same way) is that these wells are expensive to drill and decline very quickly (on the order of 60-70% or more in the first year). That means more and more wells have to be drilled every year to offset declines. The higher overall production goes, the more difficult this is to achieve. And plays have “sweet spots” where oil production is still profitable (less true with shale gas) at current prices, but these are getting drilled out first—leaving industry with drilling locations that are far less productive. That means even more wells would have to be drilled to keep overall production flat or growing, and prices will have to rise in order to justify that effort. Does that sound to you like lower oil prices are in the cards?
Maybe the real motivation for those clamoring for lifting the oil export ban isn’t sticking it to ISIS or Putin. Maybe the real motivation is the same as for natural gas industry, which is lobbying to fast-track Liquified Natural Gas (LNG) export terminals—they need prices to go up in order to keep making a profit.
Ultimately, if “the mustache of understanding” (not to mention the rest of us) were really serious about increasing our energy security, taking bold action to address the climate crisis, and countering the influence of Putin and Arab/Muslim extremists there’s only one real way to “lead from within”: Stop incentivizing and investing in oil and gas production and instead fast-track energy conservation, efficiency, and distributed renewable energy production. Ask any eight year old.