The United States has had a ban on crude oil exports ever since the Arab oil embargo era in the mid seventies. The efficacy of such a ban – assuming there ever actually was one – is long past its best sold by date, and in fact may now be causing real damage rather than any sort of protections. As our energy production capacity grows, pushing us closer and closer to being the number one oil producer in the world, the laws of supply and demand are exerting downward pressure on prices. That’s a great thing for consumers as the effect trickles down and things like gas and home heating become more affordable. But there are limits on how far down the price can go before the same market forces produce a negative backlash. We’re quickly reaching the point where production becomes unprofitable, which will cause significant layoffs and a reduction in development until the market price recovers a bit.
On Thursday, overshadowed by all the cromnibus drama, the House held hearings on this subject.
In a House of Representatives hearing on the ban, Texas Republican Joe Barton said exporting oil would boost the economy, lower gas prices, and help give allies alternative oil supplies to Russia.
By some measures the United States is the world’s top oil producer and Barton said the country should use that power.
“When you’re number one, you use that status,” said Barton, who introduced a short, 1.5 page bill this week to lift the ban Congress passed in 1975 after the Arab oil embargo.
The U.S. drilling boom of the last five or six years has led to a glut of light crude many oil refiners, who paid dearly to retool plants to run heavy crude, are unable to easily process.
Opponents are worried that lifting the ban would expand demand and lead to gas and heating prices going back up. In the short term there may in fact be a bit of that, but the market would recover as capacity continued to rise (along with hiring) to keep pace. But what they seem to fail to realize is that the prices are going to go back up anyway. If we strangle the market far enough, production will dip down to the point where upward pressure drives prices back into the profitability zone. The only difference between the two scenarios is that in the latter case we’ll see prices rise while a lot more people are standing in the unemployment lines.
Further, there are foreign policy considerations to look at here. By exporting crude directly we become even more of a player on the international market. Additional pressure will be available to exert against Russia when they threaten western Europe with their dominance of the oil supply chain in that region. Arab exporters also lose a lot of their leverage over us when we are competing against them on equal footing. We don’t often see cases where we can praise the bipartisan efforts of Republicans and Democrats together, but on this issue we see people like Lisa Murkowski and Heidi Heitkamp aligning to get this done. Lifting the ban is the right thing to do, but the usual rounds of panic politics combined with environmental alarmists who oppose anything to do with American energy independence are going to fight this and will probably succeed in stopping it.
That’s a pity, because the people they were elected to serve will be the ones who pay for their shortsighted position.