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October 16, 2015

Here's The Single Best Way To Counter Iran Without Going to War

  Rare

President Obama’s nuclear agreement with Iran means that a mischief-making country will be able to export more oil. Nations that need oil, including U.S. allies, may buy it, funneling billions of dollars into Iran.

Were the U.S. able to provide an alternative source for crude oil, those countries might give Iran the cold shoulder rather than their cold cash. But the U.S. can’t, because federal law prohibits exporting crude oil.

Before the U.S. and the European Union imposed sanctions in 2012, Iran exported about 2.6 million barrels of crude oil a day, according to Bloomberg. Exports dropped to about 1.4 million barrels a day after the sanctions, but energy analysts expect a sanctions-free Iran to add another million barrels a day to that total.

Unfortunately, Iran isn’t the only mischief-maker. The International Energy Agency’s (IEA) September 2015 “Market Report” estimates that Russia exports 6.3 million barrels a day. Venezuela exports another 2.3 million. And, of course, the Islamic State is selling oil to finance its reign of terror.

But not the U.S.—and it’s all because of gasoline shortages in the 1970s.

In response to consumers having to sit in long gas lines, Congress imposed a ban on exporting U.S. crude oil. Like so many of the government’s knee-jerk responses, the export ban had no impact on those gas lines. Congress didn’t ban the export of gasoline, which cars can use, but crude oil, which they can’t.

Eliminating the ban would open the door for U.S. producers to sell their products elsewhere if it made economic sense—and in some cases it would.

For example, crude oil has to be refined. The problem is that many U.S. refineries are set up to handle a much heavier grade of crude oil than the sweet light crude coming from most of the newly produced shale oil deposits. So selling that oil to a country with the right refineries in place might make more sense than shipping it across the country or waiting until a U.S. refinery can take it.

And it would give other countries a more reliable source of crude oil. Venezuela’s economy has pushed the self-destruct button, and there’s no telling how long it can live up to any oil-export commitments. Russia’s oil and gas exports come with political strings attached.

U.S. crude oil producers could ramp up production to ensure that countries that wanted to import American oil have that opportunity, undercutting the mischief-makers, which use their oil profits to expand their influence—and diminish ours.

The good news is there’s growing bipartisan support for removing the oil export ban. The House of Representatives has already passed legislation and the Senate may take up the debate soon.

The U.S. has already taken baby steps toward allowing exports. The Obama administration has permitted the export of condensate, an ultra-light crude that takes little processing, and has approved limited crude oil exports to Mexico.

But the White House has expressed concerns that lifting the ban completely would raise gasoline prices—although many economists and the Government Accountability Office dispute that claim.

Energy is going to be produced—the only question is who will sell it to whom? With sanctions relief from the nuclear agreement, Iran will be trying to produce and sell even more oil. In that case, the least the president could do is let the U.S. compete against Iranian exports, perhaps mitigating Iran’s efforts to fund its political mischief.

Congress may not consider Russian and Venezuelan oil exports worth challenging, but surely expanded Iranian exports are a problem. Fortunately, the U.S. has the resources and oil reserves to beat the Iranians at the export game—if only the White House will let us play.


 

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