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October 9, 2015

House Votes to End the Crude Oil Export Ban

 
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The House of Representatives has just taken a major step toward reducing the U.S. trade deficit: ending the crude oil export ban. 

In 1975, when gas lines were long and voters’ tempers were high, Congress passed legislation prohibiting U.S. crude oil exports. The country had seemed to peak its oil production a few years earlier and was on a gradual crude oil production decline, and Congress wanted the country to keep every drop it produced. 

Of course, cars run on gasoline and not crude oil, and yet there is no ban on refined gasoline products. In other words, Congress banned the export of a product drivers can’t use but not a product they can.  

But that was 40 years ago, and innovative drilling techniques have flipped the 1970s gas shortage on its head. The U.S. government’s Energy Information Administration (EIA) now ranks the U.S. as the largest producer of crude oil in the world.  

Allowing crude oil exports would increase the supply of oil, stabilize the price, and, most importantly for this discussion, reduce the trade deficit as we sold the products to other countries. 

Critics claim there’s no point in ending the ban, at least for now, because the U.S. still consumes more oil than it produces. But their claim misses two important points. 

First, analysts project that the U.S. could become a net oil producer—producing more than we consume—within five years. But establishing the infrastructure and entering into contracts will take some time, and no oil producing company is going to move forward unless it knows for sure that Washington will allow exports.  

Second is economic efficiency. Oil has to be refined to be used, and getting crude oil to a refinery that can handle it means transportation and sometimes storage costs. It may make more economic sense for a company to sell its crude oil to another country than going to the additional costs of transporting and refining it in the U.S.  

The White House opposes ending the ban, and has suggested that the Commerce Department, not Congress, should make the call on whether to lift it. But that’s just a stalling tactic, similar to the one used in the Keystone XL pipeline. 

The Senate should now approve an end to the export ban and send the legislation to President Obama, even if the White House disapproves. Don’t let crude oil exports get sidelined by the same tactic that has hindered the Keystone XL approval.




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