The crude oil export ban was put in place in a very different time. It was a time when domestic oil production was weakening and our energy future looked dim. It was a policy that made more sense in a time of oil disruptions, but makes little sense today.
As we enter 2014, it is undeniable that the United States has entered a new energy era. Hydraulic fracturing has ushered in what’s being called a “revolution” in oil production, as this technology combined with horizontal drilling has unlocked a vast amount of American crude oil that was previously trapped in shale rock. In fact, the Energy Information Administration (EIA) heralded this new oil era when it announced last month that U.S. crude oil production rose to the highest level in a quarter-century.
The time has come to expand oil exports.
The U.S. is poised to become the oil leader in the world, and will surpass Saudi Arabia in oil production over the next decade. The EIA estimates that the U.S. will import about 25% of the petroleum it consumes in 2016, down from 60% in 2005. This is fantastic news with great impacts for our energy security. However, this security is directly tied to the amount of oil we produce — that is our leverage on the international scale. It’s important to note, due to the complexity and interdependence of the crude oil market, the U.S. will not likely be at a place where we achieve zero imports — and trying to force that market unreality hurts the American economy.
Here’s why: First of all, the price of oil is not set on the domestic market, but on the world market. Eliminating artificial barriers to free trade, such as the oil export ban allows the U.S. to trade freely with our allies, which opens new markets and boosts the economy.
Allowing American crude oil to reach both domestic and international demand is critical to making the American economy more competitive. On the other hand, trying to artificially cap exports will hurt American independent producers, who drill 95 percent of U.S. wells. It will end up shutting in production and shutting down development. This will in turn stunt the amazing job creation and vast economic stimulus brought to communities around the nation.
Furthermore, the kind of oil that is produced from the many active shale formations is a light, sweet variety of crude oil. The U.S. Gulf Coast refineries, built before the era of abundant shale oil, were engineered to handle a heavier, sourer variety of crude, the kind of crude the U.S. imports from Canada, Latin America, and Saudi Arabia. Giving oil producers the opportunity to sell their lighter, sweeter crude to buyers on both the domestic and international market makes the most economic sense, as there is strong international demand for U.S. light, sweet crude.
This is an oil era of abundance and opportunity. That’s why it’s time to revisit and repeal the crude export ban. That’s why, in the words of Department of Energy Secretary Ernest Moniz it’s a perfect example of a host of issues that “deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s.” Allowing for a freer oil market will boost American job creation, grow our economy, and secure our energy future.