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By the look of it, I could swear that the apparent next Speaker of the U.S. House of Representatives is an avid reader of Oil & Energy Investor.
Kevin McCarthy, California Republican and current Majority Leader in the House, recently announced his candidacy for the speaker's chair, which will become vacant at the end of October following John Boehner's surprise resignation from both the position and the chamber.
McCarthy already understands that dealing with this Congressional majority is akin to herding cats – and feral ones at that. But his speeches over the past two days are certainly an attempt to forge enough support from both the hard right and what is left of the center to win the job.
From our perspective, here is where it gets interesting:
Aside from the knee-jerk attacks on President Obama and the support of the private sector (he is, after all, both a politician and a conservative Republican), McCarthy has expressed specific energy policy recommendations. Three in particular mirror positions we have discussed in Oil & Energy Investor on several occasions.
Here's how my positions and McCarthy's policies match up…
Strong Support for Exporting U.S. Crude
First up, the heir apparent to the speaker's gavel is in strong support of exporting U.S. crude oil.
"If there was ever a time to lift the oil export ban, it's now," McCarthy said in a recent speech. "Lifting the oil export ban will not only help our economy, it will also bolster our geopolitical standing."
Now, being from California, where the market attractiveness of heavier oil from the Monterrey Basin has been an issue for years, exporting to expand a market for American producers is an obvious choice.
However, as we have discussed here in the past ("U.S. Crude Exports May Be Coming to an End," April 2013; "Here Are the Biggest Winners As the 40-Year Ban on U.S. Oil Exports Ends," June 2014), the issues surrounding those exports are now much broader and both politically and economically more pressing.
This is all about saving American jobs and local tax bases during a time of oil price declines.
The rationale for the ban is also no longer relevant. It was introduced in 1974 following an Arab oil embargo of the U.S. market. The nation established the Strategic Petroleum Reserve at the same time. There will never be an embargo again and, in any event, we now have plenty of domestic shale and tight oil reserves to blunt the effect.
However, it has been this very largess that has resulted in pricing problems as supply (both actual and potential) weighs on the market.
Exports allow moving that excess production to higher-priced markets abroad, taking the "fight" to the Saudis, where they are more vulnerable. Given the excess capacity available, exports would have no impact on prices inside the United States.
There seems to be no downside, and there is emerging bipartisan support for the phase in.
In Favor of Renewables, but Not More Government Subsidies
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.