Federal law, since 1974, generally prohibits exporting American oil, but that law violates the Export Clause, which provides that Congress can impose “No Tax or Duty” “on Articles exported from any State.”
Could Congress impose an export tax on automobiles to keep more cars here, so consumers will pay a little less for cars? Ridiculous you say, and of course, it is. That export tariff would be economically inefficient (one of the economic truths that all economists embrace). It would hurt the balance of trade, which Congress constantly bemoans. It would reduce employment in the auto industry because it would produce fewer cars. In the very short term, it would reduce auto prices because the export tariff will increase the domestic supply, but that effect will be short-lived because auto manufacturers will reduce supply to coordinate with the reduced demand.
For example, in 1996, the Supreme Court invalidated the Harbor Maintenance Tax as an invalid tax on exports. The law applied to goods loaded at United States ports for export, based directly on the value of the cargo itself, and not upon any services that the government rendered for the cargo. The Court held that the Export Clause prohibits export taxes, even if nondiscriminatory. The Court quoted from the debates for the Framers, who argued, “the hands of the Legislature were absolutely tied” by the Export Clause, and “It is best to prohibit the National legislature in all cases.”
Congress can impose embargoes, if the purpose of that export restriction is national security. As the Supreme Court explained in another case, the Export Clause does not prohibit Congress from dealing with “peacetime emergencies and times of war.” For example, Congress can prohibit exports to certain countries for national security reasons, such as the embargo on Cuba or Iran. However, Congress cannot impose embargoes just so consumers can purchase goods more cheaply.
The Arab oil boycott of 1974 was the original justification for this federal embargo. However, that justification no longer exists, as Energy Secretary Ernest Moniz recently acknowledged. When the reason for the law changes, the law should change.
What was true in 1974 is not true in 2014. The federal oil embargo no longer deals with a peacetime emergency. Last month, the International Energy Agency announced that by 2015 (a scant 12 months from now), the United States will overtake Russia as an oil producer, and by 2017 it will surpass Saudi Arabia. The IEA is the Paris-based adviser to 28 energy-consuming nations, including the United States, Canada and most of Europe.
The oil export ban now exists to keep domestic prices artificially lower (at least in the short term, which is the typical Congressional time frame). Sen. Edward J. Markey (D-Mass.) argues, “oil should be kept here in America, to benefit our consumers,” but that purpose defies the purpose of the Export Clause. Sen. Robert Menendez (D-N.J.) agreed, “Crude oil that is produced in the U.S. should be used to lower prices at home,” and not be exported. The Export Clause prohibits that export restriction. Just as Congress cannot impose export restrictions on cotton to dampen consumer prices in the United States, it cannot impose export restrictions on oil exports when the country is awash in oil. (Texas now produces more oil than Mexico.)
Allowing oil exports will increase the incentive to find more oil domestically. It will increase employment in the oil industry. It will lower the worldwide price of oil, which will reduce the oil income of foreign dictatorships that sponsor terrorism (Iran comes to mind). That, incidentally, makes the world safer for all of us.
Rotunda is the Doy & Dee Henley Chair & Distinguished Professor of Jurisprudence, Chapman University, Fowler School of Law. He is the coauthor of the 6-volume Treatise on Constitutional Law, frequently cited by state and federal courts and foreign courts.