July 14, 2014
When it comes to oil exports, all our fears are old fears
Are you still driving a Pinto? Smoking in the office and wearing polyester bellbottoms? Probably not, because we don’t live in the 1970s any more. So why does our oil export policy remain stuck in a decades-old limbo, as an antique from the Nixon era?
Change has come fast to the energy sector in the past ten years as the full scale of growth stemming from technology and market changes has surfaced. The US is now poised to resume its role as the world’s largest oil producer, prompting widespread reassessments of economic and geopolitical forecasts for everything from trade flows and deficits to defense alignments.
Oil companies in the US can move refined products overseas, but because of the 70s era ban they remain unable to export crude oil except from Alaska. This contradictory situation, which has underwritten refinery profits by trapping crude supply in the US even as products are shipped, now threatens to limit benefits to the US economy as refineries run out of capacity to run that cheap oil through their systems. As a recent IHS Economics analysis of the US crude oil export decision amply demonstrates, trapping that oil in the US behind the walls of a refinery system that has spent three decades retooling for entirely different kinds of crude could literally cost the US trillions of dollars, and as many as a million jobs.
The oil export ban is a vestige of a panic-induced policy response to market interruptions in the 1970s, and is no longer a viable approach to the realities of the US oil sector.