In late October, free-market economists throughout the U.S. officially launched the “Unlock Crude Exports” initiative, a campaign that will aim to pressure policymakers in Washington to take action and lift the near 40-year old ban on crude exports.
Implemented in the late-1970s in response to the 1973 Arab Oil Embargo, the crude export ban was designed to enhance America’s energy security and protect consumers from unstable oil markets throughout the Middle East. In recent years, however, a surge in domestic production from shale plays across the U.S. has significantly transformed the dynamics of the global energy market. Total production in the U.S. has risen over 65 percent since 2008, and with net imports continuing to decrease, many economists believe that the ban is simply out of place.
One of the driving forces behind support for expanding crude exports is the economic benefit it would provide. In addition to lowering gasoline prices, many studies have found that lifting the ban would result in the creation of up to 300,000 new jobs between 2015 and 2020, a reduction in the federal trade deficit, and an increase in the U.S. GDP.
Lifting the ban would also likely result in an increase in domestic production because oil producers in the U.S. would be able to sell their crude for a higher price on international markets. Currently, crude can only be sold to domestic refineries (or to Canada in some circumstances) and with domestic pricing benchmarks (WTI and Louisiana Sweet) lagging behind international oil prices (Brent), producers are essentially having to sell their oil at a discount. Furthermore, if crude prices drop too low, domestic production could eventually become unprofitable, in which case activity in shale plays would taper off.
The “Unlock Crude Exports” initiative will serve as a reliable resource of information regarding oil exports and will include a wide range of studies that should ultimately help policymakers realize the benefits of lifting the ban.