The ban on the export of domestic crude oil dates back to a time when members of Congress did not have computers and Richard Nixon was president. Much has changed in the past 40 years. Today, that antiquated law is severely restricting the nation's energy policy and damaging the integrity of American foreign policy.
In 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo as a result of the involvement of the United States in arming Israel during the Yom Kipper War. At the time, America was the largest oil consumer in the world and was heavily reliant on oil imports. The Arab embargo, coupled with dramatic drops in the U.S. stock market and a steady decline in domestic oil production, had an enormous and disastrous economic impact on the American economy.
The Congress responded by banning the export of domestically produced crude oil without a license. The purpose of this new energy policy was to protect domestic oil reserves and reduce the dependence on foreign oil. For decades the policy was not challenged, primarily because of a rising economy. The new policy was not particularly successful in the 1970s, and today that flawed policy is disastrous.
In 2015, the playing field has changed dramatically. The recent sharp increase in U.S. oil production has the export ban in the spotlight once again. The United States is no longer dependent on foreign oil for its economy. In fact, the United States is now truly energy independent. According to a study by the Pew Research Center, domestic crude oil production in 2008 sunk to 5 million barrels a day. In part because of advancements in hydraulic fracking, domestic oil production is now at 9.2 million barrels a day. In the last five years, oil production in the U.S. has grown faster than any country in the world. In addition, refined oil exports, which are not restricted by the law, are being exported at a rate of 3.7 million barrels per day. Within the past year, several oil companies have received licenses to export some domestic crude oil, but the process is cumbersome and lacks certainty.
The continued imposition of the ban and the precipitous drop in the price of crude oil in recent months is costing American jobs. Oil technology and equipment provider Schlumberger has cut 20,000 jobs, and giant oilfield services corporation Halliburton has cut its global workforce by 10%.
Opponents of removing the export ban claim that the price of gasoline at the pump will rise, but that argument has been refuted by numerous independent studies. According to a recent report of the bipartisan Congressional Budget Office, lifting the ban could actually lower domestic prices and world crude oil prices.
The continued export ban undermines our country's foreign policy. Historically, the United States has been a strong proponent for free trade and open markets. President Obama has repeatedly challenged countries like China that impose strenuous import bans on American goods and at the same time flood our market with their products. The President is now forcibly urging the Congress to give him trade promotion authority to negotiate the Trans-Pacific Partnership (TPP) agreement. The President has championed a policy that encourages more U.S. exports. It is inconsistent for the United States to demand open markets by our Asian trading partners while blocking the exportation of domestic crude oil. This position undermines the very arguments America is making to its strongest competitors.
By removing the export ban, America will be in a much stronger and more leveraged position in the world's marketplace. The U.S. will be able to provide assistance to our important allies like our European trading partners that are heavily dependent on Russian oil. Europe is the market for 88 percent of Russian oil exports.
One reason the ban was enacted was because of national security concerns, but those issues can be addressed by allowing the President the authority to impose restrictions in a national or international emergency.
Lifting the ban will encourage more investment by energy companies in new technologies, increase competition and production levels, add more jobs, and ensure a more consistent and reliable market place. It is time for President Obama and the Congress to act.