

Another View: U.S. ban on exporting crude hurts consumers

1:18 PM, Feb. 5, 2014  |  Comments
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In October 1973, Arab oil-producing nations angry at America's support for Israel in the Yom Kippur War began an oil embargo that slashed U.S. supplies, shocking Americans long used to cheap and plentiful gasoline.

Huge lines sprang up at gas stations, and it was common to wait an hour to fill up. Prices soared more than 40 percent, and sales were rationed.

The embargo ended in March 1974, and many of the measures it spawned have faded away over the past 40 years, including the nationwide 55-mph speed limit and year-round daylight savings. But some ghosts from the 1970s still haunt U.S. policy, and it's time for them to go, too. A prime candidate is the ban on exporting U.S. crude oil, an unsuccessful attempt to insulate American consumers from volatile global energy markets.

Domestic oil production was beginning a long decline in the early 1970s, and in the general panic, it seemed reasonable to try to keep every drop here at home, even if that meant meddling with the nation's usual commitment to free trade.

That was then. Now, North American oil production is surging, thanks largely to the "fracking" boom in areas such as North Dakota. Energy producers are pushing to have the ban on exports lifted and, last week, the Senate held its first hearing in 25 years on the subject.

Defenders of the export ban claim it keeps consumer prices down, but that seemingly logical argument ignores how the global oil markets work. U.S. crude oil is about $9 a barrel less expensive than the benchmark world price, but that difference doesn't go to drivers in the form of lower gasoline prices. It fattens the profits of refinery owners.

Refiners banned from exporting crude face no such prohibition on exporting oil products such as gasoline. So they can buy crude low and sell gas high, at the world price. No wonder some refiners defend the export ban.

Trying to artificially hold down the price of domestic crude will, over time, discourage exploration and mute a stunning production boom that is helping drive the U.S. tantalizingly close to energy independence, a national goal since the 1973 oil shock.

Further, banning most oil exports is dangerously hypocritical for a nation that hauls other countries before the World Trade Organization for similar behavior, such as China's policy of restricting exports of rare earth minerals that are crucial to the manufacture of electronics, such as iPhones and missile guidance systems.

Except in rare instances, U.S. consumers benefit when energy policy favors open markets. That includes allowing construction of the stalled Keystone XL pipeline, which would bring oil from Canada to the United States. The pipeline would help displace the crude the nation still imports from less friendly nations, would be safer than rail transport and, according to a new State Department study, wouldn't significantly harm the environment.

An end to the export ban is a heavy lift in a congressional election year, but politicians who defend the ban shouldn't be allowed to hide behind the argument that it helps consumers. Like leisure suits and other vestiges of the 1970s, it deserves to fade away.

-USA Today


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