The War Between the EU and Russia and the American Oil Exports

After the war of October 1973 between Israel on one side and Egypt and Syria on the other, the Arab countries reduced their oil productions in order to protest for the NATO support to Israel. The NATO allies i.e. Saudi Arabia, Kuwait, the United Arab Emirates, followed the embargo imposed on the West by the Russian allies i.e. Algeria, Libya, Iraq, Egypt and Syria, in an effort to demonstrate some Arab unity. Actually reduced production meant higher prices and it was good for all oil producers. The embargo lasted for approximately 5 months and led to a 300% increase in oil prices. This sharp increase in oil prices severely affected the global economy.

As a response to the Arab oil embargo of October 1973, the addicted to oil imports United States passed the Energy Policy and Conservation Act in 1975, which forbade exports of American oil and gas, in order to enhance the energy autonomy of the American economy. It is the private sector which produces oil and natural gas in United States, i.e. ExxonMobil, Chevron, ConocoPhillips etc, but nonetheless they do not have the right to export the oil and gas they produce in the United States, unless they obtain special oil export permissions, which are very hard to get.

Most of the exceptions refer to practical or geopolitical issues. For example the United States produce a lot of oil from Alaska at the Arctic Ocean, and it is more cost efficient to export it to Canada, and exchange it for Canadian oil. Canada is the United State’s largest oil supplier, and it produces most of its oil from its southern province Alberta. The same is true for Mexico, which is the 3rd largest supplier of oil for the US, because the US produces a lot of oil from the Gulf of Mexico. See the following table and map.

Picture 1

Major Oil US Suppliers

Picture 2

US Oil Imports

But what the United States does with Mexico and Canada is not really oil exporting, since they import a lot than they export from these two countries. It is really an exchange of oil and gas in order to reduce energy prices.

Due to its struggle with Russia in recent years, the European Union is putting pressure on the US, and asks for a lift on the ban of oil and gas exports, because the EU is heavily dependent on Russian oil and gas. Russia is the largest oil and gas supplier of the European Union, and the American oil and gas would give the EU an extra bargaining chip against Russia. However the American regulations only allow oil and gas exports to countries that have formed with the US free trade zones, as it is the case with Canada and Mexico. For this reason the European Union is promoting the Trans-Atlantic Investment Partnership TTIP, which will create a free trade zone between the European Union and the US. That means there will be no customs and tariffs in the trade between USA and the EU. However the free trade zone is a necessary condition, but not a sufficient one, in order for the US authorities to allow American oil and gas exports. Export licenses would still have to be obtained for American oil and gas to be exported to Europe. Therefore the European Union is pressing the US to include energy in the Trans-Atlantic Investment Partnership, as you can read at the following Wall Street Journal article, titled “EU Wants U.S. to Lift Ban on Oil Exports”, May 2015.

“EU Wants U.S. to Lift Ban on Oil Exports”, του Μαίου 2015

In the United States there are those who believe that the US should make an exception for the European Union, in order to help the European Commission in its struggle with Russia. There are also those who believe that the United States should stay focused on its goal for energy independence. What is for sure is that the American oil and gas cannot be a substitute for the Russian oil and gas, because due to her geographical advantage Russia is Europe’s natural oil and gas supplier, together with Northern Africa of course. However even the possibility of the American oil and gas would put extra pressure on Russia. Especially in case of a war, when prices would not be the major consideration, the American oil and gas would be a game changer.

Spain is hopping to provide Europe with an alternative to the Russian oil and gas. See the following map.

Picture 3

US Oil and Natural Gas Exports

Spain is connected to Algeria through the Mahgreb Pipeline (Algeria-Morocco-Spain) and the Medgaz Pipeline (Algeria-Spain), and can also receive the natural gas of Nigeria, if the Trans-Saharan Pipeline (Nigeria-Niger-Algeria) manages to pass the terrorist Islamist organization of Boko Haram. Spain can also receive American, Nigerian and Qatar liquefied natural gas from the see. The sea is safer because there are not jihadists in the sea.

At the following Financial Times article, titled “Spain positions itself as alternative to Russian energy supply”, March 2014, you will read that Spain buys all of her natural gas from non-Russian sources, and she hopes to provide Europe with an alternative to the Russian gas. The article says that Spain has the largest LNG facilities in Europe, and that 6 out of the 21 LNG European facilities are Spanish, and that the Spaniards are preparing a 7th one.

“Spain positions itself as alternative to Russian energy supply”, του Μαρτίου 2014

For the moment Spain receives most of her LNG from Qatar, and this is one of the reasons that Spain is so aggressive towards Israel.

For the American oil exports see also the following articles.

“Why The U.S. Bans Crude Oil Exports: A Brief History”, March 2014

“Oil Export Myths”, January 2015

“The U.S. is not opening the tap on crude oil exports”, August 2012

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