Last week, Department of Energy Secretary Ernest Moniz finally, mercifully acknowledged the increasingly undeniable fact that the United States’ energy outlook is much changed from the 1970s scene in which oil disruptions and artificially induced “shortages” were enough to persuade policymakers into somehow thinking that more protectionism was a good idea. Moniz appeared, if noncommittally, to support the idea currently gaining some traction in Congress of possibly rolling back the decades-old export restrictions that largely prohibit American energy producers from selling their crude wares overseas — but it practically goes without saying that no rational, free-market-minded proposal that looks at peeling back the regulatory layers that selectively benefit niche interests ever comes without trumped-up objections, and here comes Democratic Sen. Bob Menendez bloviating with the typical anti-export talking points I could have predicted in my sleep.
Dear Mr. President:
I write to express my deep concerns over the recent comments of Energy Secretary Ernest Moniz, stating that your Administration is considering easing the ban on exporting domestically-produced crude oil. When Congress first enacted limits on crude exports in the 1970s following the oil embargo, these laws were designed to enhance American energy security and protect U.S. consumers from volatility and price spikes. Despite changes in the global energy market, these goals should remain priorities in our nation’s energy policy. Easing this ban might be a win for Big Oil, but it would hurt American consumers.
As you know, the world price of oil (otherwise known as the Brent crude price) is currently about $110 per barrel, while the American price is about $97 per barrel. The threshold question then, is why would we want to export oil and raise American oil prices to match the world’s oil price? Big Oil clearly wants to pad their record profits and fetch a higher price for their oil. ..
We must continue to keep domestically-produced crude here to lower prices for consumers, while aggressively working towards clean and renewable alternatives. Allowing for expanded crude exports would serve only to enhance the profits of Big Oil, and could force U.S. consumers to pay even more at the pump.
I would first of all point out that it actually is not necessarily a given that easing up on free-trade restrictions would in fact hike Americans’ prices at the pump, and that due to the limits on the type of oil we are domestically capable of refining, continued export restrictions will mean that a bunch of oil will just be left sittin’ pretty in the ground, of no use to anyone. Secondly, even if gasoline prices did end up increasing at home — it’s going to be OK. The increase in prices will be necessarily accompanied by a worthwhile boost in economic growth, because American producers and the many workers they employ will be able to reap the gains from these subsequently higher prices instead of having to restrict their market to a purely domestic and hence less competitive one. The WSJ gets it:
Opponents of exporting oil claim that lifting the ban would raise U.S. gasoline prices, but that misunderstands that oil is a global market. U.S. pump prices would continue to rise or fall with world oil prices regardless of exports. But lifting the ban would lead to more domestic production, which means more jobs in oil drilling and services and everything that goes along with such growth. See the booming Williston Basin in North Dakota or the Eagle Ford Formation in South Texas.
The opposition to lifting the ban will also play the energy “independence” card, but the best protection for America’s energy supply is more domestic production that exports would induce. Some of the opponents don’t want such production precisely because they want to stop the U.S. oil boom so world prices rise and renewable energy can replace fossil fuels. That’s what motivates Senator Ed Markey (D., Mass.) and others on the environmental left.
President Obama himself often includes “increased exports” as a means to bolster growth and employment in his incessant iterations of “economic pivots,” and pretending that the the free-trade benefits the federal government actively promotes in certain sectors (agriculture, for instance) are somehow inapplicable to the energy industry… literally makes no sense.