Sen. Lisa Murkowski (R-AL), the chair of the Senate Energy and Natural Resources Committee, has announced that she will introduce a bill to end the 40-year-old ban on exporting crude oil. The legislation will attract broad bipartisan support, especially from members of Congress representing oil producing states and lawmakers that are urging the administration to adopt free trade policies.
The purpose of the ban was to protect domestic oil reserves and reduce the dependence on foreign oil. In the 1970s, the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo as a result of the involvement of the U. S. in arming Israel during the Yom Kipper War. At the time, the U.S. 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 U.S. economy. President Richard Nixon and Congress responded by banning the export of domestically produced crude oil without a license.
After 40 years, the policy is damaging the U.S.'s position in the world marketplace. The U.S. is now truly energy independent, and no longer dependent on foreign oil. 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. A number of oil companies have received licenses to export 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 U.S. 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%.
In addition to environmental concerns, 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 U. S. has been a strong proponent for free trade and open markets, challenging countries like China that impose strenuous export bans on its mineral resources. President Obama is now forcibly urging Congress to give him trade promotion authority to negotiate the Trans-Pacific Partnership (TPP) agreement. It is inconsistent for the U. S. to demand open markets by our Asian trading partners while blocking the exportation of domestic crude oil. This position undermines the very arguments the U.S. is making to its strongest competitors.
By removing the export ban, the U.S. 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 and trading partners like the European countries, which remain heavily dependent on Russian oil. Europe provides the market for 88% of Russian oil exports. One reason the ban was enacted was because of national security concerns, but those issues can be addressed by allowing a president the authority to impose restrictions in a national or international emergency.
Lifting the ban would 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. This flawed policy has become a relic of the past, and the odds are good that this year President Obama and Congress will end the crude oil export ban.
Michael A. Andrews
Washington, D.C.
+1 202 626 5609
mandrews@kslaw.com
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