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Compelling arguments for exports

Momentum continues to build for allowing exports of crude oil from the United States.

On Thursday a House Energy and Commerce Committee subcommittee took a deep look at a subject I have highlighted on this blog: namely, what should our energy policies look like in this new age of energy abundance?

The hearing reviewed a significant piece of energy legislation passed in 1975 amid increasing fears of energy resource scarcity as domestic production was declining.

One of the law’s provisions bans the export of crude oil produced in the United States, and most of the hearing was dedicated to questioning whether that ban makes sense now that conditions have turned 180 degrees from where they were during the disco era.

Whereas in the 1970s Americans worried about importing more and more oil, today – thanks to soaring shale energy production in North Dakota and Texas – the United States is on its way to becoming the world’s top oil producer.

Some of the hearing’s most compelling testimony was provided by the Brookings Institution’s Charles Ebinger, who made a forceful case to policymakers for scrapping the crude oil ban. Three passages from Dr. Ebinger’s testimony particularly stood out:

  • In reviewing the history of U.S. energy policy since the early 1970s, it is apparent that whenever the U.S. government has tried to favor a particular fuel absent market realities there have been unintended consequences which have been deleterious to the U.S. economy and U.S. energy security.
  • Lifting the ban on crude oil exports from the United States will boost U.S. economic growth, wages, employment, trade and overall welfare. For example, the discounted net present value of gross domestic product (GDP) through 2039 has the potential to be between $600 billion (EIA’s reference case) and $1.8 trillion (EIA’s High Oil and Gas Resource case), depending on how soon and how completely the ban is lifted.

And

  • Allowing crude oil exports in any fashion will have positive economic affects both in the U.S. and in the world oil market. At the same time, world energy security will be enhanced by increasing the diversification of oil supply available globally, while also increasing U.S. energy security. Lifting the ban generates paramount foreign policy benefits, increases U.S. GDP and welfare and reduces unemployment, all of which will be forgone if the ban remains in place.

The case for exports is being made elsewhere, too. Earlier in the week the Congressional Budget Office published a study looking at the economic and budgetary effects of U.S. shale energy.

The CBO explained that allowing exports of crude oil and liquefied natural gas “would probably increase domestic oil and gas production, but they would probably have only a small effect on the domestic price of gas and a negligible effect on the domestic price of oil.”

As the American Petroleum Institute’s Erik Milito noted, “The CBO report makes it clear that lifting America’s outdated export restrictions will help to grow the economy and save consumers money. This is the same conclusion supported by study after study, including those from the Government Accountability Office and the Energy Information Administration.”

Check out the CBO’s report, and check out Thursday’s hearing as well, including the committee’s background document that gives a good overview of a number of the issues involved.

 


  • Worth a deeper look...