Posted August 14, 2015
We’ve put up a number of posts recently that argue for lifting the United States’ decades-old ban on exporting domestic crude oil – citing sound economic, trade and security reasons. Underlying them all is this: As an energy superpower, America will see more benefits here at home, be more secure and help make the world safer if U.S. crude is allowed to trade freely in the global marketplace.
Now, there is a compelling, market reason for urgency in ending the export ban – a self-sanctioning relic of the 1970s that hinders U.S. global competitiveness while impeding domestic energy development and economic growth. That would be the impacts on global crude markets if/when Iran resumes exporting oil under the proposed nuclear agreement the White House is advancing.
The U.S. Energy Information Administration says Iranian oil could boost global supply by about 100,000 barrels per day by the end of this year and 600,000 barrels per day by the end of 2016:
If the [nuclear] agreement is implemented and sanctions relief occurs, it will put additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year. These additional Iranian supplies, along with relatively higher global oil production and comparatively slower global oil consumption growth, will contribute to large inventory builds next year, resulting in lower oil prices than previously expected.
What you see is EIA’s projection that Iran could, in a relatively short time period, reach pre-sanctions oil production levels. So here’s why that matters to the United States: Generally, when discussing crude oil markets, it’s to America’s competitive edge to be active in those markets before Iran rejoins them. Put another way, to fully realize the broad benefits to our economy and American consumers detailed in a number of studies, U.S. oil must have access the world marketplace. America should not cede to anyone any advantage in that marketplace. The export ban should be lifted and lifted soon. API Chief Economist John Felmy:
“Outdated trade policies are among the biggest threats to America’s continued growth right now. … [L]ifting the 1970s-era ban on crude oil exports would put America in the driver’s seat on trade. … [S]tudy after study shows that lifting the ban on crude exports will mean more jobs, downward pressure on fuel costs, and could reduce the power that foreign suppliers have over our allies overseas.”
Here’s another point: Volumes of U.S. oil trade lower than global prices because they’re closed off from the world market. This is a disincentive to production investment and growth that is heightened when global crude prices are low (as they are now), according to studies by IHS and Rice University. IHS’ Daniel Yergin:
“… the impact of the (global crude) price collapse makes it much more urgent now than it was … to lift this ban because of the impact the discount creates for domestic production – and the difference between world prices and U.S. prices can be the difference between the viability and non-viability of a great deal of investment. ... [W]hen prices are lower, the negative impact on jobs and the economy are more, not less. … A $3 change in a $50 (per barrel) environment can have the same effect as a $10 change in a $100 environment. This brings us back to the export ban because, of course, because of the export ban that’s why we have the discount. It reduces U.S. oil production, supply chain activity … and job growth …”
In this context, U.S. policymakers must weigh the potential impacts on domestic production from hundreds of thousands of barrels of Iranian oil per day hitting the global market.
Let’s circle back to the overarching issue, which is U.S. global competitiveness. America is an energy superpower – the world’s No. 1 producer of oil and natural gas, according to EIA. U.S. energy should not be blocked from fairly competing against energy produced by other countries.
Ending the export ban would stimulate domestic production growth – an ICF International study says that production would increase by up to 500,000 barrels of oil per day by 2020 – add jobs and help consumers. The United States should be a major player in the global market, not a bystander, denying benefits here at home. API President and CEO Jack Gerard:
“American voters understand that lifting the ban on Iranian oil resources, while maintaining a ban on U.S. companies, is illogical and restricts our own competitiveness. It doesn’t make sense. U.S. energy producers should not be placed at a competitive disadvantage to anyone, whether it is Russia, Iran or any oil producing country. This outdated crude exports policy must be repealed to level the playing field and allow the U.S. to flourish as a global energy superpower.”
ABOUT THE AUTHOR
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.