Predatory foreign investment and domestic energy security
U.S. energy markets started 2016 with good news. The 40-year-old oil-export ban, which long has hamstrung one of the world’s leading oil-and-gas producers, is now defunct. As of New Year’s Day, the first tankers of American crude oil left for Europe.
A relic of a bygone era, the ban initially was a response to the economic trauma of the 1973 Arab Oil Embargo, during which oil prices nearly quadrupled over the course of just six months. The embargo caused a dramatic global economic and security crisis and prompted many of the whiplash measures that were embedded in the Energy Policy and Conservation Act of 1975. It did not help that energy policy at-large, and oil policy in particular, were at the time still in thrall to a protectionist mindset that sought to preserve domestic resources and weaken the influence of foreign trade.
Times have changed radically in the proceeding four decades. With the advent of hydraulic-fracturing techniques and a better understanding of tight geologic formations, the North American oil-and-gas industry is booming. That boom has translated into a sea change in international energy markets. The Organization of Petroleum Exporting Countries (OPEC), dominated by Saudi Arabia, has been ineffective in its recent attempts to manipulate oil prices. Security crises in the Middle East no longer translate to price spikes at the gas station.
Lifting the oil-export ban is widely expected to boost U.S. gross domestic product, household incomes and job creation, not least by raising the value of U.S. oil-and-gas resources and stimulating fresh investment in the U.S. oil-and-gas industry. But the work now begins to ensure the domestic benefits of repealing the ban are realized fully. As this paper attempts to demonstrate, U.S. policymakers would be well-served to look to the examples of major energy producers, such as Canada and Australia, who have managed to attract massive foreign investment in their domestic energy sectors without compromising either free-market principles or national security. The United States must do no less.