NCPA - National Center for Policy Analysis

The Case for Crude Oil Exports

March 25, 2014

The United States' energy policy banning crude oil exports makes no sense today, says Merrill Matthews, a resident scholar with the Institute for Policy Innovation.

Crude oil export restrictions have been in place since the 1970s when the United States suffered gasoline shortages, but with the U.S. oil and gas boom due to new innovations in drilling there is no need for those restrictions anymore. Allowing oil and gas exports would lower the price of energy, increase supply and improve U.S. security.

  • The global oil and gas supply is subject to short-term disruptions. And while those were up one-third in 2013, world prices did not see a major negative impact. Why? Because of increased U.S. production. The U.S. Energy Information Administration attributed the relatively stable global oil prices to rising crude production in the United States.
  • Many of the top oil and gas producers are not friendly to the United States, and they threaten cutting off their energy supply to try to gain influence over other countries' policies. If these threats emerge, the United States needs to be able to fill those gaps with its own oil and gas. Allowing exports would lead to more production and would stabilize not just supply, but price.
  • North Dakota is at the center of the oil and gas boom. Not coincidentally, its unemployment rate is 2.7 percent, compared to the national 6.6 percent rate. And as for growth, the state grew five times faster than the national average in 2012.
  • The federal government owns 28 percent of U.S. land, including 62 percent of Alaska and 47 percent of 11 Western states. Companies would be willing to drill there, but the Obama administration has delayed and denied drilling permits. While production on private lands has shot up, production on federal lands has fallen 23 percent since 2007.
  • States and the federal government have received billions in revenue thanks to oil and gas production. Texas alone received $8.8 billion in royalties and taxes from oil and gas in 2013. And in 2010, the federal government received $8.5 billion in federal income taxes from the energy industry. Opening federal land up to drilling would create a massive stream of revenue.
  • In 2013, crude oil imports declined by 16 percent, from $310 billion to $268 billion, reducing the U.S. trade deficit by $22 billion every month. If the export ban were removed entirely, the United States could be a net exporter of oil in just five to seven years.
  • On top of these economic benefits, the United States would no longer have to worry about upsetting foreign oil producers, and our allies could turn to us for oil if their oil supplies are threatened by foreigners.

Because of the export ban, the United States has spent the last four decades having to "make nice with certain politically repressive, oil-producing countries." It is time for the federal government to get rid of the ban and become an exporter of crude oil and natural gas.

Source: Merrill Matthews, "The Case for Permitting Crude Oil Exports," Institute for Policy Innovation, March 2014.


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