It’s Time to Rethink the U.S. Oil Export Ban.

In 1975, President Gerald Ford authorized a ban on the export of crude oil produced in the United States, in an effort to effectuate an increase in American oil stockpiles. This was widely seen as a natural consequence after Saudi Arabia and other OPEC nations had refused to ship oil to the U.S. in an attempt to achieve their own political objectives. Decades later, however, it is widely seen as an ancient relic of a different global economy. Many of our legislators have recently called for the repeal of the oil export ban; though there are arguments on both sides, I ultimately share these legislators’ belief that the ban does not mesh with today’s global economic climate, especially for the United States.

The United States produces more oil today than during the 1970s, and so such an adverse move today by OPEC and/or Saudi Arabia would have less of an impact. During the current slide in oil prices, Saudi Arabia – ostensibly the most singularly powerful OPEC nation – has refused to budge in terms of its output, even as demand has been widely forecasted to be less than the supply available in the near-future, thus creating the current glut. Unfortunately for Saudi Arabia, though, it would seem likely that not many other OPEC nations are keen on letting oil’s value stay in the basement for a lengthy period of time. These other nations, as happened in the 1970s, may begin to push back on Saudi Arabia and demand action, especially as the current situation starts to complicate national budgets and may even lead to some civil unrest.

Interestingly, BHP Billiton earlier this year fired a salvo across the bow of the United States government when it decided to make oil produced in Texas and located on one of its ships available to the world market. The U.S. government has not strongly condemned the move, and other actions (or inaction) by the Obama Administration have indicated that they would not aggressively pursue action. I believe that BHP Billiton’s actions in making the oil available to the world market, and more importantly the lack of governmental reprisal, would suggest that we are seeing the first cracks forming in the foundation of the oil export ban. In the alternative, should there be a paradigm shift and a sudden curtailing of these exports, I would guess that there would be high-level litigation.

While allowing crude exports may not be the best solution in every economic environment or situation, the efficacy of lifting the ban now – in the midst of many industry jobs being threatened due to the current slowdown – would be profound. There are those who subscribe to the “Peak Oil” Theory; they would suggest that because our oil resources are finite and there is even less oil available than many believe, that the United States should be hoarding its own resources domestically in preparation for when that happens. I do not think any reasonable person is suggesting that oil is a never-ending resource, but oil companies are a persistent bunch – it seems that each time we have been “rapidly depleting” our remaining easier-to-access oil resources, those enterprising oil companies and independent production outfits figure out a cheaper, more efficient way to get harder-to-access resources. Innovation is rampant in the energy industry, and I don’t see a reason for that to stop now.

Removing the oil export ban would at least allow U.S. producers to make their product available for sale around the globe, rather than just in our own country. If doing so would help more American oil producers survive the current downtrend, then it would logically follow that the oil and gas industry would be able to more ably tread the bearish waters in which we currently find ourselves mired. Given how much the United States economy and workforce owe to job growth in the oil and gas industry – especially over the past decade – I believe that removing this ban would be a net positive for our country.