There they go again. Repeating their tiresome tirade against U.S. oil companies, Sens. Edward Markey (D-Mass.) and Robert Menendez (D-N.J.) recently discounted a new report from the U.S. Energy Information Administration (EIA) that finds U.S. crude oil exports would be good for American consumers.
The two avowedly anti-oil politicians stated: “Exporting American oil might be good for Big Oil’s bottom line, but it would harm American families and businesses, and erode our progress towards energy independence that enhances our national security.”
{mosads}They are wrong. In truth, the EIA report and other studies show quite clearly that free-market-driven U.S. crude oil exports could help consumers by lowering gasoline prices, creating well-paying jobs, and boosting the U.S. economy.
The new EIA report found crude oil exports would not raise gasoline prices because they track the global cost of Brent oil produced in Europe. Therefore, if U.S. crude oil exports led to a slight increase in oil prices, U.S. consumers would not experience higher prices at the pump.
In a separate study, the Government Accounting Office (GAO) discovered that allowing exports could actually decrease consumer fuel prices. By selling U.S crude on the global market, more oil would be available worldwide, which could push prices down, create a new incentive for additional U.S. oil production, increase the size of the U.S. economy, lead to more jobs, and reduce the trade deficit.
Moreover, an economic analysis by IHS said U.S. oil exports could support nearly an additional 1 million jobs by 2018, add $73 billion to the Gross Domestic Product by 2016, and reduce energy costs. According to this report, gasoline prices could fall by an average of 8 cents a gallon.
So why are Markey and Menendez leading the fight against oil exports? Apparently they are putting politics before economics. Surely they know that policies that distort the functioning of consumer-directed markets falsify economic reality and have unintended consequences.
Fact is the ban on U.S. oil exports, enacted in 1975 in response to the Arab Oil Embargo, has always done more harm than good. In combination with government-imposed price controls, the edict failed in its primary missions to keep oil prices low and preserve domestic oil reserves from depletion, which was a big worry at that time.
Rather than improve U.S. energy security, government over-regulation increased dependence on foreign oil by preventing the production of up to 1.4 million barrels of U.S. oil per day.
Today, oil depletion is the least of our worries. The United States is awash in domestic oil due to advanced technologies that are releasing resources from shale formations. However, much of this oil is light or ultra-light, rather than heavy, sour crude oil which is a better match for U.S. refineries. If exports are not allowed soon, Goldman Sachs projects available U.S. refining capacity for the former could be overwhelmed by mid-2015.
Recognizing this developing problem, the U.S. Commerce Department recently awarded “private rulings” to allow Pioneer Natural Resources Co. and Enterprise Products Partners LP to export ultra-light oil from the Eagle Ford shale formation in Texas. According to reports, BHP Billiton plans to export ultra-light oil without government approval, leading some observers to comment that the export ban is collapsing.
U.S crude oil production is soaring and expected to hit 9 million barrels per day by the end of this year compared to only five million barrels a day in 2008. Rather than address the over-supply of ultra-light crude in a piecemeal manner, a complete reversal of the export ban is needed.
When the new Congress is sworn in early next year, repealing the prohibition on oil exports should be a top priority. Not only would removing the ban help the economy, but also it would signal an end to the paralyzing legislative gridlock that has angered the electorate for the past several years. The voters have spoken: they want less government in place of more.
Bradley is CEO of the Institute for Energy Research and author of seven books on energy history and public policy. He blogs at www.masterresource.org.