The first shipment of American crude oil has reached European markets. This comes only a month after Congress took a big step toward a more sensible energy policy by terminating the crude oil export ban.
The crude oil export ban, an antiquated and misguided regulation that dated back four decades, had tied the hands of oil producers who were, with limited exceptions, barred from exporting America’s abundant supply of crude oil to international markets.
Thanks to innovations in the oil and gas sector, hundreds of years’ worth of oil and gas are accessible. Despite bipartisan support, President Barack Obama threatened to veto legislation lifting the ban, recommending that Congress instead focus on a “transition to a low-carbon economy.” However, last December, Congress passed its omnibus spending bill, which included a repeal of the ban.
The arrival of this shipment to Europe, the first unrestricted since the 1970s, heralds the start of an enormous benefit to the economy. Lifting the ban will supply more oil to the market and generate more opportunities both for the American oil sector and the industries that support it. Getting rid of the crude oil ban could add as many as 380,000 new jobs to the U.S. economy as well as increase the U.S. GDP by more than $38 billion by 2020.
The positives extend beyond just economic benefits. The reintroduction of free trade into the domestic oil market will also improve U.S. energy producers’ ability to respond to supply disruptions, changes in market demand, and oil refinery capabilities better than could be done by politicians and bureaucrats in Washington. Further, made to compete with foreign energy producers for crude oil supplies, U.S. crude oil refineries will have greater incentive to compete with foreign markets, ultimately driving a better product for American markets as well.
This new access to the global market for American companies to supply crude oil will also change international dynamics by increasing global competition.
The simple ability for American companies to export crude oil takes away the power of certain countries, like Russia, to manipulate energy resources for political purposes. Attempts by these countries to hold crude oil supplies hostage are more likely to backfire with the renewed presence of American companies in the global oil market.
In fact, in an attempt to keep its share of the market, the Organization of Petroleum Exporting Countries (OPEC) continues to pump out more oil supplies, even if it is at a loss, which ultimately should lower prices by increasing supply.
In addition, the first liquid natural gas exports since the energy boom are on schedule for this month. However, the federal government has been slow to respond to the new energy landscape, and much reform is still necessary. Natural gas exports could promise billions of dollars in increased trade revenue for the U.S.
This first delivery of crude oil since lifting the export ban has been an important step toward opening up the American energy sector to the free market. Instead of allowing the federal government to control decisions, energy should be treated like any other industry and be able to rely on free enterprise to best allocate resources.
Congress should take these lessons to heart and continue making the policy changes necessary to open up the American energy sector for the world’s business.