IMAGINE THERE were a simple policy that would spur economic growth, lower gas prices and please international allies. This policy exists: removing the United States’ irrational and outdated ban on exporting domestically produced crude oil. A bill lifting the ban passed a Senate committee last week, a day after House Speaker John Boehner (R-Ohio) announced that he, too, supported bringing the country fully into the international oil market.
Congress imposed the ban amid the oil shocks of the 1970s in a desperate move to tame gasoline prices. Lately, the situation has changed: U.S. crude oil production rocketed up 74 percent from 2008 through 2014. That has led to a glut here at home, where crude oil is selling at a discount relative to world prices. Yet the ban’s superficial logic still appears to hold some power: Lifting the export restrictions, one might imagine, would send more oil abroad, which would raise gasoline prices here and hurt the economy.
In fact, experts predict gas prices would go down, based on the simple fact that you don’t put raw crude oil in your tank. Consumers don’t buy crude oil. Refiners do. Domestic gasoline prices tend to track international, not domestic, oil prices. So the current policy is great for refiners who get to buy their feedstock at a bargain price and sell their product at an international rate. But it’s not much help to domestic producers, who have to accept less money for the crude they bring to market, or to consumers, who don’t get the savings passed on to them.
In fact, a Government Accountability Office review released in July noted wide agreement among analysts that allowing crude exports would tend to decrease international oil prices, which is the way to depress gasoline prices. That is why analysts counterintuitively predict that lifting the export ban would increase U.S. crude oil prices by $2 to $8 per barrel but reduce U.S. gasoline prices by 1.5 cents to 13 cents per gallon.
More important than a few cents per gallon, however, are the significant economic benefits that the country would reap from a healthy energy production sector. A new analysis from IHS Energy finds that the sector’s supply chain spreads throughout the country — from engineers on site in North Dakota to heavy-duty equipment manufacturers in the Midwest to computer programmers in Massachusetts. Yet, with the export ban, the business faces the possibility of wholly unnecessary gridlock: The U.S. refining sector isn’t optimized to take the sort of crude oil that’s coming out of new wells. The obvious solution is to sell some of it to foreign refiners.
The most serious objection to lifting the ban comes from environmentalists who worry that it would lower fossil fuel prices and lead to more oil consumption. That concern seems to have kept some Democrats from supporting the bill. There could be an opportunity for a productive deal here: Adding energy research funding, efficiency programs or, in an ideal world, a charge on carbon dioxide emissions to the package could balance its possible effects on the environment.