One of the symptoms of improved energy technology and massive oil production growth in the United States is a renewed and re-energized debate around whether the U.S. should lift its 40+ year-old ban on exporting crude. That’s what the U.S. House Agriculture Committee discussed in a hearing July 8 , and what CME Group Executive Chairman and President Terry Duffy, who testified at the hearing, wrote about in a CNBC oped. Duffy writes that the ban, instituted after the Middle Eastern oil embargo in 1973, did not accomplish its stated goals.
It was a clear case of expedient politics and poor policy. Instead of protecting the U.S. from volatile price swings and limiting our reliance on crude-oil imports from other countries, this artificial barrier is actually hurting the very producers who unlock oil from shale-rich fields in places like North Dakota and Texas. Segregating U.S. crude from the world market has created price distortions that skew investment decisions and give foreign producers a leg up–the very opposite of the intended consequences.
The segregated U.S. Crude is the NYMEX-traded West Texas Intermediate (WTI), the benchmark for North American crude, and one of two primary benchmarks globally along with North Sea Brent. In his testimony and oped, Duffy argued that since the U.S. has the most advanced financial markets that already price global crude, repealing the ban would enable the U.S. to be at the center of the global crude oil trade. “Congress should repeal the ban on crude-oil exports and align our energy policy with today’s market dynamics,” he wrote.
The call for an end to the ban comes at a time of unprecedented U.S. oil production. The Energy Information Administration (EIA) expects U.S. output to reach 9.2 million barrels per day in 2016, putting the U.S. third in the world behind only Saudi Arabia and Russia.
The discussion also comes as Senate and House proposals have been put forth to eliminate the ban. The primary one comes from Senator Lisa Murkowski (R-Alaska), while House Ag Committee Chairman Mike Conaway (R-Texas) and Rep. Henry Cuellar, (D-Texas) introduced a companion bill.
In addition to U.S. crude aligning with market dynamics, there are a few other main reasons advocates and researchers say the U.S. will benefit from lifting the ban:
More jobs: Energy consultancy IHS suggests lifting the ban will create about 124,000 U.S. jobs per year between 2016-2030.
Lower gasoline prices: Exports could lower oil prices globally, which could lead to lower domestic gas prices, advocates say. At the House Ag hearing, Harold Hamm, founder of Continental Energy, called the ban “a terrible relic of the Nixon era that today actually harms the American economy and makes domestic gasoline and diesel prices higher than they should be.” Read Hamm’s recent Wall Street Journal oped on the urgency of repealing the ban.
More domestic energy production: Research from the Government Accountability Office cites increased production estimates between 130,000 and 3.3 million barrels per day up to 2030. Their report also says lifting the ban will expand the U.S. economy.
Better trade policy: The U.S. already exports agricultural crops and energy sources including refined gasoline and distillates. A report from the Council on Foreign Relations suggests the economy could grow by $15 billion per year by 2017 if the ban is lifted, and the U.S. would bolster its position on other trade issues if it were an oil exporter.