U.S. Oil Exports: ‘The World Will Be a Safer Place’

Mark Green
Posted July 10, 2015

The compelling case for lifting America’s decades-old ban on exporting domestic crude oil is multi-faceted:

• Economic – NERA Economic Consulting estimated that lifting the ban could add $200 billion to $1.8 trillion to the U.S. economy between now and 2039.
• Consumers – A variety of studies indicate that lifting the ban could lower prices at the fuel pump from 1.7 cents per gallon to up to 12 cents per gallon.
• Foreign policy – The positive nature of home-grown crude oil in global relationships, helping allies and potentially neutralizing the ability of adversaries to use energy as a diplomatic weapon.
• Energy – Domestic production, spurred by greater access to global crude markets, could grow by 2.1 million barrels per day to 4.3 million barrels per day over levels under the status quo, according to NERA (its chart below):  

Certainly, each of these was argued again at a pair of Capitol Hill hearings, one by the House Agriculture Committee (video) and another by the Energy and Commerce Committee’s Energy and Power Subcommittee  (video). API Executive Vice President Louis Finkel:

“Crude exports could generate immediate and long-lasting benefits for U.S. workers, for U.S. consumers and families, and for our allies abroad. Bipartisan momentum is stronger than ever, and lawmakers should seize this opportunity to cement America’s role as a global energy superpower. … We applaud the bipartisan efforts of leaders in Congress who are ready to send a signal of strength to our allies abroad, and we urge House and Senate leaders to make this a top priority.”

Let’s focus on the signal to America’s global allies that would be given if the U.S. began exporting domestic crude oil. This from Ambassador Petr Gandalovic of the Czech Republic, discussing legislation that would lift the export ban (about 59 minutes into Energy and Power Subcommittee hearing video):

“I cannot assure you that if you pass this bill there will be a direct purchase from our refineries … of U.S. crude oil. I can predict that if there is an alternative coming from the U.S., as a democratic state that doesn’t use natural resources as a political tool, the world itself will be a … safer place.”

The point can’t be overstated or repeated too often: The United States has a generational opportunity – one not seen in four decades, or about the time the oil export ban was imposed – to assert a significant, positive energy influence in the world.

As an energy superpower, allowing domestic crude free access to the global market, the United States would be the balancer and diversifier of global supply – and help end the use of energy to dominate and intimidate by some around the world. As Amb. Gandalovic suggests, the mere presence of U.S. supplies in the global market would create options, choices for countries that rely on imported energy. Yes, the world would be a safer place. It’s an opportunity that’s completely in our hands. We should not let it pass by.

Other highlights from the two hearings.

Kari R. Cutting of the North Dakota Petroleum Council told the Agriculture Committee that crude exports would greatly benefit rural America – as it already is doing in her state:

“The U.S. oil and gas industry can rise to meet many challenges through innovation and hard work, but facing export restrictions at home places the industry at an extreme competitive disadvantage. The U.S. government should lift the ban on crude oil exports and allow oil produced here at home in places like North Dakota, to reach global markets. The U.S. energy industry deserves the opportunity to compete globally; lifting the ban on crude oil exports would immediately restore our competitiveness and revive the renaissance in rural America. Not only would rural America prosper, but all U.S. citizens would benefit from lifting the ban. … The story of North Dakota oil and gas development and its impact on agriculture in our state is an amazing American story, one that is being discussed all over the world. Exporting crude oil will have a dramatic effect on our state’s ability to fully develop the Bakken and realize its full benefits. Now is the time to follow North Dakota’s lead and let our nation be the energy leader for the world.”

The Government Accountability Office’s Frank Rusco reiterated key parts of a GAO review of crude export studies, which found macro-economic and consumer benefits from lifting the export ban. A key portion of that review:

“Removing export restrictions is expected to increase the size of the economy, with implications for employment, investment, public revenue, and trade. . . [C]onsumer fuel prices, such as gasoline, diesel, and jet fuel, could decrease as a result of removing crude oil export restrictions.”

NERA’s W. David Montgomery, underscoring the benefits of lifting the export ban for the economy and U.S. consumers:

NERA’s study “found that across all the scenarios we examined, restrictions on oil exports reduce U.S. GDP, slow down job growth and recovery from the recession, and cause higher gasoline prices. Despite the very beneficial drop in world oil prices that we have experienced since that study was completed, I still conclude that restrictions on crude oil exports impose those costs on the U.S. economy, lead to less crude oil production in the U.S. and cause higher gasoline prices for consumers than there would be if these restrictions were lifted. … [R]estrictions on crude oil exports impose a cost on all consumers by making prices of gasoline and heating oil higher than they need to be. Despite what is frequently claimed by opponents of crude oil exports, restrictions on oil exports do not lower gasoline prices. Every study of crude oil exports has reached the same conclusion.”

Again, the arguments for ending the anachronistic, self-limiting prohibition on exporting U.S. crude oil are clear and convincing. The studies have been completed, the issue has been thoroughly vetted. It’s time for policymakers to act and lift the export ban.