An energy renaissance is underway in the United States. According to a new report by the International Energy Agency (IEA), America’s decades-long dependence on foreign oil may soon be over. By the mid-2020s, the United States is set to surpass Saudi Arabia as the world’s largest oil producer.
Even more promising is that by 2030, the U.S. is set to become a net oil exporter—but not if U.S. policymakers have anything to say about it.
In 1975, the U.S. government banned crude oil exports with only some limited exceptions. At the time, U.S. energy markets were in dire straits—the combination of government price controls and the Arab oil embargo crippled oil and gas supplies to U.S. consumers. Despite some of the bad policies, domestic producers responded by dramatically increasing production.
Sadly, policies that prohibit or unnecessarily slow production on federal lands and waters as well as bans on crude oil exports limit producers’ ability to respond to higher prices.
Limiting exports of crude oil discourages energy exploration in the United States. Companies hoping to tap America’s oil resources may be discouraged from doing so because they cannot take advantage of the global marketplace.
Export limitations also discourage production because they cause a domestic surplus. This surplus cannot be cleared because producers cannot take advantage of other prices on the international market—like Brent crude from the North Sea, whose price is much higher than domestic West Texas Intermediate crude. Ultimately, these problems are passed on to the consumer in higher prices.
The U.S. government has long been reluctant to export its energy resources—from its historic bans on crude oil to recent foot dragging on natural gas. Yet exports have long been touted as a way to grow our economy out of the current recession. What better way to do this than by allowing one of our most promising industries to take advantage of billions of global energy consumers?