Time for Congress to Answer OPEC’s Attack (OilPro.com)

It was only a matter of time.

America’s oil and gas boom was sure to be felt around the globe, and OPEC’s (Organization of the Petroleum Exporting Countries) decision to keep gouging its own members’ profits by maintaining its production levels is certainly proof enough that the world is standing up and taking notice.

Now for the real trick: getting the government of the United States to finally support this boom before OPEC manages to kill it.

Thanks to OPEC’s dangerous gambit, crude oil prices are down nearly 50 percent and still falling, with a surplus of 2 million barrels produced every day. Making matters worse, demand is expected to decline in 2015.

The effect of the plummeting price and projected demand is already being felt: rigs are laying down. The world’s second-largest oil field services company, Halliburton, has announced layoffs; ConocoPhillips is cutting its investment spending by 20 percent next year.

For American shale oil producers, OPEC’s decision is particularly pointed. Producing unconventional resources costs more, and OPEC knows this. Just how much E & P companies need to break even is still a moving target as costs are rapidly coming down with increased expertise and continued technological breakthroughs. There is already talk of budgets cut by 30 percent among companies with a focus on unconventionals.

The US Congress has the power to help oil and gas companies weather this man-made storm, in the form of oil exports and subsidies.

The ban on crude oil exports is not only no longer necessary, but counterproductive. Enacted in 1975, the ban was designed to protect America from price shocks during the Arab oil embargo by keeping oil at home. There’s no shortage of oil anymore, and there won’t be.

Lifting the ban, especially now, would incentivize investment by opening up international markets to US producers and ensuring that they can afford to stay in the game—even if projected revenue is marginal in the short term. According to the International Energy Agency (IEA), most shale oil from the Bakken formation is profitable at just $42 a barrel, and the consulting firm IHS has estimated that 80 percent of American shale oil can be profitably produced for $50 to $69 per barrel.

Aside from the chilling effect on American operators, OPEC has its own problems. According to the International Monetary Fund, Kuwait, Qatar and the United Arab Emirates can balance their budgets on oil priced at about $70 a barrel, but Venezuela and Nigeria need $120 and Iran needs $136.

If the US Congress would lift the ban on crude oil exports, it would put additional pressure on OPEC to reduce production.

Another way Congress could help US oil and gas producers fight back against OPEC’s tactics is to offer the types of subsidies it lavishes on alternative energy companies. The current US energy revolution helped bring the country back from near-economic disaster, supporting 2 million jobs and increasing economic output by $283 billion. Congress has incentive to keep this boom and the resultant economic gains going.

US taxpayers shelled out $7.3 billion in tax subsidies for renewable energy in 2013. Similar support in the form of tax credits, tax breaks, research funding and other subsidies to the oil and gas industry would help ensure that the US energy revolution remains on track to delivering American energy independence.

OPEC’s decision to maintain production levels that inevitably sent prices tumbling was designed to kill the American energy revolution. It only makes sense for Congress to answer OPEC’s attack with a clear message of its own: America and its energy producers won’t be brought down. Congress can do that by lifting the ban on crude oil exports and opening the Treasury’s checkbook to give America’s energy producers the support they’ve earned.

Written by: Chris Faulkner, CEO of Breitling Energy Corp., author of “The Fracking Truth” and producer of the documentary, “Breaking Free: The Shale Rock Revolution.”

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