Since our last post, and much as predicted by three previous declines in the last six months, the WTI-Brent has collapsed again from $9 to $4.50. There is increasing talk of removing the ban on US oil exports. In particular, there was a study conducted by the Brookings Institution which argues in favor of lifting the ban. The authors are unequivocal [their emphasis]:
Based on our analysis we recommend that the U.S. reconsider and modernize its energy policy by lifting the ban on crude oil exports entirely and immediately. It is evident to us — based on our policy deliberations, the extensive macroeconomic modeling of the U.S. economy and the global oil market research we have commissioned — that the greater U.S. exports of crude oil, the greater the economic and energy security benefit to the country.
There were also comments by former Treasury Secretary Lawrence Summers:
The merits [of lifting the ban] are as clear as the merits with respect to any significant public policy issue that I have ever encountered. And it is an important test of the efficacy of the functioning of our democracy whether within the next nine months we will get to that correct solution.
There is therefore increasing momentum in favor of lifting the export ban. This would probably require a vote in Congress and is unlikely before the November midterms.
The latest long-term budget outlook from the Congressional Budget Office reads like a particularly dark noir: Things start out pretty bad. And then they get worse.
“Over the past few years,” the report’s first sentence explains, “the federal government has been recording budget deficits that are the largest as a share of the economy since 1945.”
Before the year is out, debt held by the public — the federal government’s outstanding debts to outside parties — will equal 70 percent of the total economy. That’s not a pretty picture. And it’s not likely to get better. It is a foregone conclusion that large entitlements, Medicare and Medicaid in particular, are destined to cost far more as a percentage of the economy due to the aging of the Baby Boomer generation, the rise in health costs, and long-term care expenses born by Medicaid. If today’s laws are kept on the books, “spending on the major federal health care programs alone would grow from more than 5 percent of GDP today to almost 10 percent in 2037 and would continue to increase thereafter.”
In a quarter century, entitlements, which currently account for about 10 percent of GDP, would alone chew up a full 16 percent of the economy. That would represent a massive historical shift: For the last four decades, the entire federal government, including entitlements, has consumed an average of 18.5 percent of the country’s economic output. Relative to the size of today’s economy, that would be like spending an extra $850 billion annually on entitlements. In a growing future economy, it will be far more. READ MORE.