Yes, Lift the Crude Oil Exports Ban

Mark Green
Posted March 20, 2015

The case for lifting the 1970s-era ban on U.S. crude oil exports, in a nutshell:

• The ban is a relic of the past, of an era when the U.S. was producing less and less of its own oil and importing more and more of oil produced by others.
• Crude exports would add to global crude supplies, putting downward pressure on the cost of crude. A number of studies project that lifting the export ban would lower domestic gasoline prices.
• Exports would stimulate domestic production, protecting U.S. jobs and creating more in the future.
• Exports would strengthen U.S. economic power that underlies American global influence.

There are more reasons, more details to the affirmative export case, a number of which were aired at a Senate Energy and Natural Resources Committee hearing this week. In its totality, it’s a strong, strong case. Carlos Pascual, formerly of the U.S. State Department and now a new senior vice president with IHS:  

“It is rare that policy options arise in the energy world that offer such overwhelming, unmitigated benefits as allowing American producers to export crude oil to international markets.”

Pascual’s comment echoes those of former Obama administration economic adviser Lawrence Summers last fall:

“I believe that the question of whether the United States should have a substantially more permissive policy with respect to the export of crude oil and with respect to the export of natural gas is easy. The answer is affirmative. The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.”

Simple question, then: What’s the holdup? Old fears, new misinformation and difficulties grasping the new U.S. energy reality that has been created by America’s energy revolution – specifically, surging domestic oil and natural gas production. Witnesses at the Senate hearing focused on these obstacles to needed policy change.

ConocoPhillips Chairman and CEO Ryan Lance talked about the dramatic shift in America’s energy outlook (prepared remarks):

“By any measure, our nation has been on a transformational journey – one that must continue if America is to fully realize our energy potential. The task ahead is to fully understand today’s realities and to make the appropriate policy decisions for these realities. In doing so, we can all play a part in sustaining this energy transformation, enhancing our energy security, and spurring economic benefit for our nation and for the American consumer. … There is no longer any question about whether or not the United States has enough oil and natural gas to meet domestic needs. The unconventional resources are real, they are abundant and they are here for the long term. Our long-held fear of impending energy shortages or concerns that future generations won’t have enough energy is a holdover from a bygone era.”

Instead of energy scarcity, the United States has energy opportunity – to meet needs here at home while becoming a major player in global crude oil markets. A new IHS report details economic benefits from crude exports from 2016-2030:

• $86 billion in additional GDP
• An average of 400,000 jobs supported over the time frame
• 25 percent higher pay for workers in the energy industry supply chain or an additional $158 per  household
• $1.3 trillion in federal, state and municipal revenue from corporate and personal taxes

Elizabeth Rosenberg of the Center for New American Security:

“Going forward, our remarkably productive, innovative and resilient energy sector can deliver even further benefits to U.S. economic and national security. However, these benefits will be clipped if policymakers do not change antiquated crude export policies that prevent U.S. oil from moving to markets overseas. In a domestic market awash with oil, keeping 1970s-era export restrictions in place discriminates against U.S. producers and threatens investment in new supply, thereby jeopardizing economic, security, and trade gains from the energy boom.”

From a strategic, global standpoint, exporting U.S. crude provides opportunity as well. The United States could be the key stabilizer and diversifier of global crude supply. Lance:

“The ability of rising U.S. production to serve as a stabilizing force in the world market will decline in the future, as U.S. oil imports decline, unless we choose to allow crude oil exports. Such exports could, by making up for production losses elsewhere, help reduce market volatility. Additionally, by helping continue the U.S. production renaissance through creation of new markets, exports would serve to strengthen the economic power that underlies U.S. global influence, while the exports themselves could serve to diversify energy supplies for countries that now rely on less-secure sources.”

And Pascual:

“Over the past years, I have been engaged in some of the toughest challenges at the intersection of energy and geopolitics – from negotiating the implementation of the energy sanctions imposed on Iran, to addressing the energy risks to Ukraine and Europe from Russia’s violation of Ukraine’s national sovereignty. From my experience, I have seen that lifting the export ban would increase U.S. leverage in convincing international partners to adopt policies that mirror U.S. interests on Iran, Russia, free trade, and even the environment.”

The Senate hearing follows other public discussions on crude oil exports, and there should be a national conversation. Crude exports make sense economically and strategically. Lifting the ban would enhance the United States’ ability to act in a way that matches its energy superpower status. The opportunity is real and it’s golden. Lance:

“Our nation has the resources, the industry capability and know-how and clear economic drivers to allow exports without negatively impacting consumers. Policymakers have an opportunity to be on the right side of today’s industry, economic and geopolitical reality and bring greater prosperity to our nation.”

API President and CEO Jack Gerard, while not part of the Senate hearing, says the time has come for Congress to move on exports:

Evidence “is mounting that 70’s-era trade limits are damaging America’s economic potential. Study after study shows that blocking trade in crude oil harms consumers at the pump, the economy and our trade balance. It also limits job creation, and it undermines America’s role as a global leader in energy. By opening the doors to trade, we can provide a counter to other nations that use their energy production as a geopolitical tool, even as we increase our own energy security. The economics of free trade are in America’s favor, and increased global competition for market share has only helped to put this issue into focus. Policymakers who support America’s future as an energy superpower have shown they are ready to act, and we urge the Senate to make this a top priority in the year ahead.”