Despite veto threat, Congress moves closer to lifting crude export ban
The U.S. House late last week voted to lift the politically contentious 40-year-old ban on crude oil exports. This sends debate over to the Senate, which already has passed measures through two committees supporting an end to the export ban.
It also certainly put the White House on notice. President Barack Obama already has issued a veto threat. The administration maintains, “legislation to remove crude export restrictions is not needed at this time,” offering their explicit support for a policy that fails the public in so many ways.
It’s high time to lift the ban. Here are a few reasons why:
- The ban on exporting crude oil didn’t work. Congress initiated the ban on crude oil exports, along with a suite of other measures, as part of the 1975 Energy Policy and Conservation Act (EPCA) that was intended to promote energy security in the wake of the debilitating Arab oil embargo. The policy was formulated on an odd assumption: that keeping crude oil at home would insulate the United States from future global oil-supply shocks. This worked for about a decade, until the share of imported oil began to skyrocket. Any supply restrictions or price increases internationally were directly reflected in the prices that Americans paid at the pump.
- The ban on exporting crude oil does not protect Americans. The crude export ban is odd in another way: once that oil is turned into a useful product, like gasoline or propane, it can be freely traded internationally. That means that crude oil prices reflect domestic supply and demand realities, while product prices reflect global supply and demand realities. Restricting the export of crude oil has no positive impact on pricing or fuel availability for Americans. In fact, exporting crude oil could, per the U.S. Department of Energy, “lower petroleum product prices for U.S. consumers.”
- The ban on exporting crude oil actually diminishes our energy independence. The oil boom overloaded domestic refining capacity and prices fell dramatically against international prices. In September 2011, domestic per-barrel prices were $29.59 below international levels, while gasoline prices stayed stuck at $3.66 per gallon. We had abundant supply, but very few customers. These artificially low prices forced oil producers to reign in production, research and investment in future innovation. The predictable result is an industry dedicated to trimming margins, not to pushing the boundaries of production techniques.
- The ban on exporting crude oil destroys wealth and jobs. Independent studies from NERA Economic Consulting, IHS Global, the Aspen Institute, the American Action Forum and others have found that lifting the ban would dramatically increase oil production, inject billions into the domestic economy and attract hundreds of thousands of new jobs across all regions. The estimated losses in productivity, wealth generation, the tax base and employment are staggering figures, and a helpful reminder that limits to free trade, however well-intentioned, stifle economic growth.
Innovations in oil development have produced an energy boom that’s upended global markets and turned the United States into the largest combined oil and gas producer on earth. This productivity has met resistance only through an archaic failure of energy policy. It’s high time to overturn the export ban and promote free trade and American energy independence.