End the ban on oil exports

The country has just taken another step towards energy independence—which also means energy security.

Sens. Lisa MurkowskiLisa MurkowskiOvernight Energy: Obama integrates climate change into national security planning GOP pressures Kerry on Russia's use of Iranian airbase Overnight Energy: Lawmakers kick off energy bill talks MORE (R-Alaska) and Heidi HeitkampHeidi HeitkampDemocrats press Wells Fargo CEO for more answers on scandal Wells Fargo board to decide on executive clawbacks Week ahead: Funding fight dominates Congress MORE (D-N.D.), along with 10 other Senate cosponsors, have introduced the Energy Supply Distribution Act (S. 1312), whose primary purpose is to end the 40-year ban on exporting U.S. crude oil.

Congress passed a crude oil export ban in 1975 as an understandable, if ineffective, response to the Organization of the Petroleum Exporting Countries’ efforts to use access to crude oil as a political weapon.

OPEC’s decision to cut back oil production left the U.S. with higher gas prices and often long gas lines.  For one of the first times Americans felt the helplessness that comes when foreign countries had us at their mercy.

U.S. oil production had already been declining, having reached its peak in 1970 with an average of 9,637 million barrels of oil per day, according to the U.S. Energy Information Administration.  By 1975 production had declined by 1.3 million barrels a day.

So Congress wanted to ensure that any U.S. oil and natural gas produced in the U.S. stayed in the U.S.  The ban allowed the politicians to claim they were doing something without actually doing anything.  But it never made much sense.

First, the ban is on crude oil exports, not refined gasoline products.  But nobody puts crude oil in their tanks.  So Congress banned exporting a product the public can’t use in its original state (crude oil) but not something we could (gasoline).

Second, if the was ban was intended to make us less dependent on foreign oil imports, it didn’t work.  While the 1979 and 1981 recessions (with the later being a deep recession) led to a decline in oil imports, by the mid-1980s the economy and oil imports both started surging, peaking in the mid-2000s.  

And though consumers used less oil during the recent Great Recession, the primary factor behind the decline in imports since the end of the recession in 2009 is the explosion of oil production.  Today, the U.S. is importing roughly the same amount of oil as it did in 1996—only the 1996 import level was part of a sharply rising trend, not a decline as today.

The third reason the ban didn’t make much sense is that it undermined economic efficiency.  Crude oil has to be refined before people can use it.  But refineries aren’t necessarily in the same place the oil is being extracted—especially today when innovative drilling techniques are opening up oil fields around the country.

And even if they were close, that doesn’t mean the refinery is set up to refine the kind of crude being pumped nearby.  The Texas Gulf Coast refineries are very good at refining very heavy crude oil, like that being produced in Canada—hence the drive to build the Keystone XL pipeline to ship it down.  In some cases it may make more sense to export crude to another country rather than ship it across the U.S. for refining.

But the biggest reason why the ban makes no sense anymore is strategic.  Among the 10 top crude oil exporters are Saudi Arabia, Russia, Iran and Venezuela.  Saudi Arabia is certainly an ally, but it decides how much oil it will or won’t produce based on its own self-interests.
Russia, Iran and Venezuela use access to energy as a diplomatic bargaining tool.  And they use the profits from those sales to foment mischief in the world.  Providing our allies and other countries with an alternative source for their energy needs helps undermine that mischief.  

Murkowski chairs the Senate’s Energy and Natural Resources Committee.  If she is able to move her legislation out of her committee on a bipartisan vote, it has a good chance of reaching the Senate floor, where most Republicans and several Democrats will likely support it.

The U.S. has become the leading oil producing country, according to the EIA.  Ending the export ban creates a global market for U.S. oil that will increase production and stabilize prices.  The U.S. once dominated the energy markets, with the right policies it can do so again.  

Matthews is a resident scholar with the Institute for Policy Innovation, an independent, nonprofit public policy organization based in Dallas, Texas.