Action Item: U.S. Oil Exports
Posted July 14, 2015
A potential nuclear deal with Iran that would permit the Iranians to resume exporting crude oil to global markets – short-term and long-term – underscores questions about our own oil export policies. Here are two: What are the implications of Iranian crude oil exports for U.S. production? And: When will our government lift de facto sanctions against the export of U.S. oil?
Bloomberg reports that Iran’s oil minister says the country can increase exports by 500,000 barrels a day as soon as economic sanctions are lifted, then an additional 500,000 barrels a day in the following six months. Richard Nephew of Columbia University’s Center on Global Energy Policy is less optimistic about that kind of ramp-up. The U.S. Energy Information Administration (EIA) has said Iran could reach 700,000 barrels per day by the end of 2016.
The point is, if there’s a nuclear deal that lifts economic sanctions against Iran, Iranian oil will be getting to market.
Just last month the Senate Energy and Natural Resources Committee’s majority staff issued a policy paper on the intersection of Iranian oil exports and America’s 1970s-era oil export ban – the gist of which is that U.S. oil exports should be allowed to compete freely against Iranian oil. With the news from Vienna, the academic debate is inching closer to reality.
The paper notes that the United States is the only advanced nation that prohibits the export of domestic crude oil. It says the possibility of an agreement with Iran has “brought to the fore a great geopolitical irony: lifting sanctions will boost Iranian oil exports at a time when federal law and regulations generally prohibit American exports.” Giving Iranian oil producers market access while denying it to U.S. producers would significantly impact domestic output. The paper:
When those sanctions are lifted, the rise in global supply will put downward pressure on global prices. The net effect will be to negatively impact oil production in the United States, the domestic benchmarks for which are discounted from the global benchmark. In short, the general prohibition on exporting domestic crude oil amounts to a de facto sanctions regime against U.S. producers. Lifting sanctions against Iran without also lifting the ban on U.S. exports will allow Iran to compete in markets largely inaccessible to American companies.
U.S. Sen. Lisa Murkowski, the committee’s chairman:
“We are letting Iran export its oil to markets that we prevent our own companies from accessing. Any deal that lifts sanctions on Iranian oil will disadvantage American companies unless we lift the antiquated ban on our own oil exports. The impending deal with Iran is at the center of the nexus between national security and energy policy.”
The United States is an energy superpower and should be a major player on the global market. A number of studies have found that allowing the export of U.S. crude would put downward pressure on U.S. gasoline prices to the benefit of American consumers. Depending on the study, the benefit could range from 1.7 cents per gallon to 12 cents per gallon.
Beyond consumer benefits, U.S. crude exports would result in $15.2 billion to $70.2 billion in additional investment in U.S. exploration, development and production of crude out to 2020 while adding 300,000 jobs and growing the U.S. economy, according to a study by ICF International (chart). A study by NERA Economic Consulting estimates that lifting the export ban could add $200 billion to $1.8 trillion to the U.S. economy between now and 2039.
The reality – and the unhappy irony – is that America is effectively sanctioning itself with a ban on the export of domestic crude oil. The prohibition works against our own national interests – in terms of trade, economic and consumer benefits, energy production, energy security and the opportunity to exert positive world influence as the balancer and diversifier of global supply.
The export ban, created in a vastly different era when the U.S. energy situation was characterized by scarcity, needs to be lifted to match the new era of U.S. energy abundance. Earlier this year, API President and CEO Jack Gerard talked about exports as a linchpin to the U.S. energy revolution and the projection of American values in the world:
“A new era of energy abundance, born of innovation, has created a once-in-a-generation chance for America to cement its future as an energy superpower. But evidence is mounting that 70’s-era trade limits are damaging America’s economic potential. Study after study shows that blocking trade in crude oil harms consumers at the pump, the economy, and our trade balance. It also limits job creation, and it undermines America’s role as a global leader in energy. By opening the doors to trade, we can provide a counter to other nations that use their energy production as a geopolitical tool, even as we increase our own energy security. The economics of free trade are in America’s favor, and increased global competition for market share has only helped to put this issue into focus.”
Whenever America engages in free trade for the things it produces, American producers win. That should apply to crude oil as well. Lift the crude oil export ban.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.