The following first appeared in the Oct. 16, 2014, edition of The Fort Worth Star-Telegram. Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at SMU.
October 21, 2014
Partly because of President Barack Obama’s indecision on the Keystone XL pipeline, Canada is looking at Europe as a major potential market for its growing output of crude oil.
A pipeline is under construction that will bring oil from Alberta and Saskatchewan to export terminals in Canada’s Atlantic Provinces. Several tankers have already delivered Canadian crude to refineries in Europe.
The Canadians are also lining up customers in India and elsewhere.
Meanwhile, because of the U.S. ban on crude oil exports, we’re missing the boat. The restrictions were enacted in the 1970s in response to the OPEC oil embargo, with the aim of reserving American oil for American customers.
The logic of the ban — if there ever was one — no longer applies.
Opponents of repeal continue to argue that crude exports will harm the U.S. economy by boosting the costs of refined products such as gasoline, diesel and home heating oil.
They also argue that exporting oil will weaken our energy security because we’re still a net oil importer. But the energy landscape has changed dramatically.
Today, thanks to the shale boom, the U.S. is the world’s third-largest oil producer, and the International Energy Agency projects we’ll be number one by 2016.
At the same time, domestic consumption of oil-based products has fallen by more than 2 million barrels per day since 2005, as we continue to become more efficient in our use of refined products.
This has been a boon to some refiners who are using their excess capacity to ship gasoline and other refined products, which aren’t subject to the ban, to buyers abroad.
U.S. imports of crude oil have dropped from almost 13 million barrels per day in 2007 to less than 6 million at present. And most of what we import comes from non-OPEC countries like Canada and Mexico.
Because oil is an internationally traded commodity and its price is determined by global supply and demand, keeping American oil at home doesn’t convey any benefits to consumers.
As for energy security, it’s hard to envision a scenario that would result in our inability to import oil.
Even with political unrest in Libya, Iraq, Syria and other petroleum exporting countries, oil prices are at a four-year low. And we still have the Strategic Petroleum Reserve in the unlikely event of a major conflagration that would disrupt oil flows.
But the strongest case for removing the crude oil export ban is the growing importance of the oil and gas industry to the American economy.
Nearly five years after the end of the Great Recession, America’s economy is far from robust; but if it hadn’t been for the shale boom the economy would be even weaker.
A decade ago, the industry accounted for less than two percent of the nation’s economic output. Today, it’s about eight percent of gross domestic product (GDP).
Direct employment in oil and gas extraction has doubled over the past decade to more than 200,000, a faster growth rate than any other sector of the economy.
It’s time to acknowledge that oil today is no longer “liquid gold” but simply an ordinary, globally traded commodity.
Continuing to restrict oil exports is not in the public interest, nor does it enhance our national security. The 40-year ban has outlived its usefulness and should be repealed as soon as the new Congress convenes.
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