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It’s time to rethink the outmoded oil-export ban

By
From page A8 | January 20, 2014 |

The booming U.S. energy industry is on pace to produce more oil than Saudi Arabia by next year, but it can’t sell a drop of that crude overseas.

The United States has banned crude-oil exports since 1975, two years after the Arab oil embargo sent gasoline prices soaring and made Americans nervous about energy security.

The gas lines of the 1970s are a distant memory, but the policies of that era live on. Some people in Washington are starting to talk about rescinding the export ban.

Sen. Lisa Murkowski, R-Alaska, said last week that retaining the export ban will eventually reduce U.S. production and cost jobs. The president of the American Petroleum Institute also argued that getting rid of the export ban would be “pro-growth” policy.

Even Energy Secretary Ernest Moniz said recently that the ban needs to be revisited “in an energy world that looks nothing like the 1970s.”

He’s right, but getting the rest of Washington to agree will require confronting some persistent energy-policy myths. The biggest one is that keeping American oil in America somehow results in lower prices for gasoline.

It’s not true. Although American producers can’t export crude oil, they can and do export refined products like diesel fuel and gasoline. Petroleum products, in fact, have been among the fastest-growing U.S. exports in recent years. Some European refiners have been driven out of business by the flood of U.S. products.

The result has been that U.S. gasoline prices track more closely with the European benchmark, Brent crude, than with the cheaper West Texas Intermediate. “The windfall has been going to the refineries,” says William O’Grady, chief market strategist at Confluence Investment Management in Webster Groves.

Allowing crude exports from the U.S. would reduce refiners’ profit margins, O’Grady says, but make no difference to the price we pay at the pump.

Nor is there a good national security argument for not selling oil to our trading partners. “It actually gives us a bit more geopolitical clout by being able to export.” O’Grady argues.

The export ban could hurt the U.S. as domestic production continues to grow. Refineries will eventually run into capacity constraints, and U.S. crude-oil prices will fall even farther below the world benchmark. That will put a damper on the very drilling activity that has made the shale-oil revolution possible.

“If we want this industry to continue to expand, lifting this export ban is one of the things we’re going to have to do to make sure that expansion takes place,” O’Grady says.

Even in a sharply divided Washington, and even in a congressional election year, this tweak to U.S. energy policy should be a no-brainer. It won’t affect the budget deficit, and it should reduce our trade deficit.

Some politicians might characterize allowing exports as a handout to Big Oil, but it’s not. In fact, part of the oil industry– the refineries – would be hurt by the policy change, because they would lose their monopoly on domestic crude. Drilling companies would be helped, but they’re the ones creating jobs and bringing the U.S. closer to energy self-sufficiency, a goal that has been illusory for every president since Richard Nixon.

Disco music, wide lapels and other 1970s artifacts have been out of fashion for a long time. It’s time for that era’s energy policy to join them on the scrap heap of history.

David Nicklaus is a columnist for the St. Louis Post-Dispatch. Follow him on Twitter at www.twitter.com/dnickbiz.

David Nicklaus

LEAVE A COMMENT

Discussion | 7 comments

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  • Danny BuntinJanuary 20, 2014 - 12:20 am

    Trust me, if big oil could lose a nickel on this suggested change Mr. Nicklaus would certainly be singing a different tune. Is this what goes for opinion these days? A planted corporate shill, writing not from his heart/truth, but from his accounts receivable. Drill baby drill, then sell it to the highest bidder despite country loyalty. The U.S. can be their private army, but you must let us trade a national security commodity because we want more money. Privatize the profits and turn over any down side to the tax payer. Yep, business as usual.

    Reply | Report abusive comment
  • Skeptic ScroogeJanuary 20, 2014 - 2:36 am

    Keep our oil in the USA! Exporting oil will cause prices to skyrocket.

    Reply | Report abusive comment
  • The MisterJanuary 20, 2014 - 8:11 am

    Of course the government banned oil exports as Nixon closed the Gold Window. The reason is the same reason as the conspiracy with OPEC to create the Petro-Dollar (oil around the world could ONLY be traded for in US dollars). With the Gold Window closed, inflation was set to skyrocket... which it did. Instead of exporting oil in the 1970s, we began exporting our inflation. As every country had to buy their oil with US dollars, they sucked up our excess dollars anyway they could. Our excess dollars (caused by inflation... the issuing of excess dollars by the central banking system) suddenly had value because of the demand for them by other countries (and not righteous value added by the people). We made the world suffer because our centralized economy (government, banks, mega-corps) counterfeited the value of US dollars and sold it abroad under the threat of US military violence. Why do we hate Iran and Libya? Because they have made efforts to trade oil outside of the conspiracy of the petro-dollar. Our next war with Russia will be for the same reason. And here you just thought our politicians were stoopid. They might be, but they are just puppets doing what they are told to do. Research Ellen Brown (running for CA treasurer) and Bill Still to further your education.

    Reply | Report abusive comment
  • Mike KirchubelJanuary 20, 2014 - 12:46 pm

    American refineries are becoming a very closely-held oligarchy that can manipulate domestic prices at will. Just shut down a couple of refineries and prices shoot through the roof. Perhaps we should ban exporting refined oil products as well.

    Reply | Report abusive comment
  • JonesieJanuary 20, 2014 - 2:25 pm

    With all the money US refineries are making selling refined products overseas these companies still whine that they don't have enough money to upgrade & properly maintain their refineries.

    Reply | Report abusive comment
  • Rich GiddensJanuary 20, 2014 - 2:46 pm

    This may actually be a great idea today. If we are going to make this move, it must be done soon and quickly. As we speak there are new developments! Tesla motors is promising a 30k all electric vehicle by 2016 with over 200 miles range! That development along with more commercial vehicles using US produced natural gas mean a further reduction in oil use down from the current 17 million barrels a day of which currently 9 million is US produced. Isn't the future great? Europe is shrugging off it's environmental weenieism and will now embrace fracking along with horizontal drilling. Another exciting development is what Ford Motors is doing with solar cells to produce electricity to power vehicles. One of their tech geniuses asked ''what would happen if we put an optic magnifying glass atop a solar cell?!" Eureka!

    Reply | Report abusive comment
  • Mike KirchubelJanuary 20, 2014 - 2:53 pm

    From the March 5th, 2012 column, "Putting out the fire with gasoline, "If you’ve been taking notes, which I strongly suggest, you’ll recall that in my Jan. 30 Daily Republic column, “Keystone XL reality check,” I wrote: '. . . America currently has an excess of refined oil products. To prevent a domestic glut, refiners are now shipping record amounts of gasoline and diesel fuel overseas, keeping fuel pump prices elevated and oil company profits high.' Last year, for the first time since 1949, the U.S. exported more refined oil products than we imported. In fact, we exported a net average of 439,000 barrels per day. Every day. Dang, that’s a lot of gasoline. American oil refinery production problems, distribution and the ongoing industry monopolization are also extremely pertinent topics to address here, but they deserve more space."

    Reply | Report abusive comment
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