After four decades, good riddance to oil export ban
As part of the budget deal to keep the government running for another year, the 40-year-old ban on exporting U.S. crude oil is finally set to be lifted. It’s about time. The ban, imposed in response to the Arab oil embargoes of the 1970s, has long since outlived any usefulness it might have once had. More recently, it has done palpable harm to domestic producers.
West Texas Intermediate, the benchmark for domestic oil, has been selling for several dollars less per barrel than oil on international markets, a difference that stems from the dearth of options for where it can be sent for refining.
This has made it harder for domestic producers to turn a profit and attract investors, at a time when the global collapse in oil prices has eliminated approximately 100,000 jobs in America. Surely this was not what President Ford had in mind when he signed the ban in 1975, saying that the time had come to “put ourselves solidly on the road to energy independence.”
The ban has not made America more secure. According to the Institute for Energy Research, it has not even had a major impact on gasoline prices. What it has done is subsidize refiners, who benefit from a captive supply of oil to buy at bargain prices.
In addition to being a case study in the law of unintended consequences, the ban provides two other important lessons for lawmakers. One is that they shouldn’t enact laws out of emotion. They did so four decades ago when they responded to anger over gas station lines and the rising power of oil-rich Arab sheikdoms. They are in danger of doing so again today, out of the fear of terrorism and large-scale immigration.
The other lesson is that, once in place, any law or regulation is extremely difficult to get rid of, even if the conditions present at its creation disappear. The Inter- state Commerce Commission, for instance, was created to regulate the robber-baron railroad empires of the 1880s. It lived on until 1995, though no one could precisely articulate what it was for in its latter decades.
Similarly, the export ban has endured at a time when it is out of place and contrary to U.S. interests. For the past several decades, policymakers and lawmakers of both parties have been obsessed with boosting exports as a way of reducing the trade deficit. And here they are with a ban on exports.
Remaining defenders of the ban, many from labor and environmental groups, are simply against anything that helps oil producers. They are right to urge action on climate change. But this can be done only by putting a price on carbon pollution and reducing greenhouse gas emissions, not by trying to halt fossil fuel production.
The United States recently passed Saudi Arabia and Russia to become the largest producer of oil and other liquid fuels. This is good for the U.S. economy, and the increased production of natural gas has helped the environment by displacing coal for electricity generation.
In the final analysis, the best thing to say about the oil export ban is that it is reaching the end of the road.