The tragedy of the crude oil export ban

As Congress looks at end-of-the-year priorities, top on its list must be ending the Federal ban on U.S. crude oil exports.  This outdated policy puts American companies at a competitive disadvantage and is causing significant economic harm and jobs losses in my home state of Texas and across the country. 

The world has changed drastically since the 1970s and the Federal crude oil export ban no longer serves its intended purpose. Forty-two years ago, war raged in the Sinai Peninsula. Egypt and Syria, hoping to avenge their territory losses from the Six-Day War a few years earlier, had launched a surprise attack on Israel on Yom Kippur –the most holy day of the Jewish calendar. Shortly into the war, President Richard Nixon authorized a strategic airlift to provide military supplies to the Israelis. Arab states retaliated through the Organization of the Petroleum Exporting Countries (OPEC), resulting in an oil embargo on Western countries that caused a massive spike in price. 

Scrambling to respond, Congress enacted various measures, including price controls (that led to gas station lines stretching blocks), direct rationing and a ban on exporting crude oil from the U.S.  Most of those laws have long since been eliminated, but the export ban lives on, a relic of the past that now serves exactly the opposite of its once intended effect. 

The export ban was intended, above all, to protect our domestic oil supplies in an era of oil scarcity and help keep gasoline prices low. Four decades later, a wide body of research indicates that eliminating the ban now in an era of oil abundance would stabilize and even lower the price of gasoline at the pump for millions of Americans. This is because domestic gasoline prices are based on global oil prices.  Lifting the ban would increase the global oil supply and lower global oil prices – which would lead to savings for U.S. consumers at the pump. According to scholars at the Columbia University Center on Global Energy Policy – who both happen to be former advisers to President Obama and Secretary Clinton – lifting the ban would cause prices at the gasoline pump to fall, potentially as much as 12 cents per gallon. 

The export ban was also intended back in the era of oil scarcity to protect U.S. industry (and the jobs created with it) from the shock of OPEC’s price-making actions. However, the export ban now actually magnifies the impact of a recent OPEC supply glut designed to harm U.S. oil workers. 

Over the past few years, the hydraulic fracturing revolution has catapulted the U.S. into the upper echelon of oil producing nations, bringing with it hundreds of thousands of middle class wage jobs. In turn, it has also helped to weaken the influence of Russia and Arab States that depend on oil production for their power. 

Facing the potential end to their monopolistic pricing power, OPEC has moved aggressively to maintain market share by increasing production, which has plunged prices and eliminated a number of U.S. oil producers in the process. Because of the Federal crude oil export ban, significant amounts of U.S.-produced oil end up essentially “trapped” in the U.S. market, creating a local supply gut that only amplifies the impact of OPEC’s actions. 

As chairman of the Texas Railroad Commission, which is the state’s chief energy regulator, I’ve seen the impacts first hand. 

In May 2014, the state issued 2,389 permits. One year later, the number was 916. Each drilling rig creates approximately 224 jobs, so with the loss of 1,072 rigs, we lost over 240,000 jobs. 

This has caused significant economic pain in our state. Unlike the glamorized windswept plains in a Hollywood movie, the industry in Texas and across the country is composed of hardworking, middle class people who are hoping to make ends meet and send their kids to college. Lifting the crude oil export ban would create new opportunities and help put these people back to work. 

Two well-respected scholars at the Brookings Institute, Charles K. Ebinger and Heather L. Greenley recently wrote, “lifting the ban on crude oil exports would be overwhelmingly beneficial for the U.S. economy and U.S. energy and national security.” Congress and the president should not ignore the advice of these and a host of other experts from across the political spectrum who are advocating for the repeal of the crude oil export ban. 

It’s been forty years since the ban was put in place, and it’s well passed time to eliminate this policy. Congress and the president must take immediate action to lift the ban in order to protect American jobs, our economy and our national security. Let’s leave this relic in the scrapheap of history where it belongs and embrace our position as a global energy superpower. Let’s lift the ban on crude oil exports.

Porter is the chairman of the Texas Railroad Commission.


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