Here’s a piece of legislation the Republican Congress should pass pronto: end the decades old, misbegotten ban on the export of crude oil, as well as the stifling bureaucratic restrictions on the export of natural gas. Astounding advances in technology and new discoveries of oil and natural gas reserves have skyrocketed U.S. energy production. America is drilling and refining more oil than it has in decades. Gas is so abundant that electric utilities can’t build or retrofit plants fast enough to absorb it all.
These barriers were put in place to help American businesses and consumers by keeping the stuff at home rather than letting foreigners get their hands on it. Back in the 1970s people thought we were running out of both resources because nominal prices were going up. The real cause was the weak dollar. When President Ronald Reagan and Paul Volcker’s Federal Reserve ended the terrible inflation of the 1970s, commodity prices crashed. Oil fell from almost $40 a barrel to $10 before stabilizing in the $20-to-$25 range.
In the early part of the last decade the Fed, with the connivance of the Treasury Department, weakened the greenback, with the same consequences: Commodity prices zoomed up, with oil reaching a peak of more than $140. Now that the dollar has strengthened—something the Fed didn’t intend, which says something about its competence—commodities such as oil have taken a hit, just as they did in the 1980s. The price of natural gas was already low because of the surplus generated by fracking.
This is why antiquated restrictions on oil and gas exports are especially harmful now. Our oil storage capacity has peaked, which means oil fields will have to cut production because there’s no place to store the stuff. It’s one thing when lower prices or less demand affect output; it’s quite another when production is reduced because of artificial, government-caused reasons. At a time when falling oil prices have put many drillers under serious financial pressure, removing wrong-headed obstacles to increase demand would make all the sense in the world.
Repealing these prohibitions would not only lead to more demand from overseas for our oil and gas but also bring closer the day that the U.S. becomes the world’s leading energy producer. More to the point, rising output at low prices will spur the use of natural gas—an ultraclean fossil fuel—for both new purposes (think transportation) and traditional ones, such as a raw material for the chemicals industry.
Opening up the export taps would also lead to a more efficient, i.e., cheaper, oil market. Most of our refineries, particularly on the Gulf Coast, are geared toward processing what’s known as “heavy” crudes. The surge in U.S. production, however, has come in what are labelled “sweet” or “light” crudes. It would make sense–and in dollars and cents–to allow us, in effect, to swap light crudes for heavy crudes until the day comes when we can construct new refineries here.
Licensing for liquefied natural gas export facilities should be approved in a timely manner instead of falling victim to the foot-dragging that’s all too common. The House of Representatives has passed such legislation. It should be coupled with a bill to end the ridiculous ban on oil exports and passed expeditiously.
Most people don’t realize that the U.S. is already the world’s largest exporter of fuels, which include diesel, gasoline and jet fuel. We send roughly 4 million barrels of these products overseas each day. In the natural gas arena U.S. producers have used technology to impressively lower costs. Whatever happens to the dollar, we can easily be a major player in the global fuel market.
It makes no sense to ignore this colossal opportunity any longer. According to one report, between 394,000 and 859,000 U.S. jobs could be created by lifting these export bans. Americans would receive lower long-term energy prices, and increased U.S. energy output would make the world a safer place.
By Steve Forbes