President Trump could issue executive order to establish import quotas keeping OPEC oil from US refineries
I’m embarrassed. Republican presidential candidate Donald Trump promised to (sort of) ban OPEC and I missed it. My only consolation is that the rest of American media missed it, too.
Trump gave his first – and to date only – energy speech at an industry event in Bismark, North Dakota back in late May. With the Republican convention underway in Cleveland, GOP and Trump policy positions will be under the microscope. The candidate’s approach to OPEC is a game changer and shouldn’t be ignored.
He covered a lot of ground in his Bismark speech, which is probably why energy journalists like me skipped over these lines: “American energy dominance will be declared a strategic economic and foreign policy goal of the United States…We will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.”
Closing US markets to OPEC would send a shockwave through global oil markets and potentially reconfigure geopolitical strategies in the Middle East. Banning OPEC is arguably Trump’s most significant energy policy plank.
How would a President Trump accomplish this feat? University of Houston energy economist Ed Hirs has the answer: Import quotas.
In fact, as I’ve written before, Eisenhower imposed oil import quotas in 1959 (Nixon repealed them in 1974) with an executive order. No need to wrangle with Congress, Trump would have all the authority he needs.
And plenty of political support in oil producing states. The Texas-based Panhandle Producers & Royalty Owners Association put OPEC oil back on the political front burner in April, when they issued a press release promoting the idea of barring OPEC from exporting to the USA and it was picked up by the Associated Press and a few other media, including North American Energy News.
I wrote in the linked column that the scheme was perfect for Republican presidential contenders, especially Trump given his fulminating about lopsided trade agreements, and wondered which candidate would pick up the ball and run with it.
Turns out it was The Donald.
Just how much oil does OPEC supply to the US? According to the U.S. Energy Information Administration, in 2015 America imported 2.7 million b/d from OPEC members. Total US consumption is just under 20 million b/d.
To replace the 2.7 million b/d, the Panhandle Producers & Royalty Owners Association suggested exempting Canada and Mexico from the quotas. Canada is slated to increase oil sands production by 1 million b/d by 2025 and Mexico is just starting energy reforms that it hopes will significantly boost oil output.
OPEC supply couldn’t be replaced overnight, but it wouldn’t take long, either.
In this column, Hirs explains how the quota would work and why it is in the long-term interest of American producers and consumers, even though domestic energy costs would rise – usually a non-starter from a politician’s point of view. But Trump is not your run of the mill politician.
Voters – and my media colleagues – need to pay closer attention to this issue as the presidential campaign heats up this summer. The idea is too important to ignore.
And I promise not to miss Trump’s next “ban OPEC” pronouncement.