To Put It Crudely: End Oil Export Ban : A time-warped policy needs liberation by Washington
Does it make sense to continue to ban U.S. exports of crude oil? No, plain and simple. It’s high time to get rid of this albatross. The ban is contrary to free trade--and unfairly excludes U.S. crude from international markets.
There is no oil crisis now; indeed, the world is awash in low-priced oil. Yet the prohibition on U.S. crude exports goes on. Why?
Lifting the ban has been called a “no-brainer” by some energy experts, but the politics of oil often defy logic. Common sense tells us that forbidding oil exports is no substitute for a coherent energy policy. Congress should reject the ban when it comes up for review later this year.
The wall against exports was erected during the 1970s oil emergency. The rationale was to provide a measure of self-sufficiency: Oil vital to U.S. energy and national security interests wouldn’t go to foreigners.
The ban has meant that Alaskan producers have little choice but to send their oil south instead of abroad; so most of that crude ends up in California. The Alaskan oil, in turn, depresses prices here for California-produced heavy crude, which is less desirable for domestic refining in the current market. California’s independent producers say that, given the Alaskan glut, it’s not profitable for them to pump crude from the ground.
But ah, there is a huge overseas market--especially for Alaskan oil--in Japan and elsewhere. Alaskan crude would be going overseas instead of to California were it not for the ban. There have been exceptions to the ban: In 1991, the Bush Administration granted an export license to two California oil companies to sell their heavy crude in Asia. Why not allow the free flow of oil for all?
Opponents of lifting the ban cite the need to secure energy resources and the threat of higher prices for consumers. They note that the United States already imports about half of its oil and that prices here could rise with export demand and the increase could be passed on at the pump. Perhaps, but prices depend on overall market conditions, domestic production and other unpredictable factors.
The U.S. Department of Energy plans to launch a study, which will include hearings, on lifting the ban. Restricting U.S. oil exports makes little economic sense. Our judgment is that those hearings will yield the conclusion that the domestic import ban distorts markets and prices and hardly offsets U.S. reliance on oil imports.