Congress and President Obama should resist pleas from large oil producers and their supporters to eliminate controls on crude oil exports that have served our national interests well for four decades. These limits on crude oil exports keep gasoline prices low, provide American jobs for the men and women who produce the fuels we use every day and provide a historic opportunity to gain energy security by breaking the grip of foreign governments and oil cartels on our crude supply.
Rather than export crude oil, we should refine domestic oil at home to continue benefiting Americans. A 2014 analysis by Barclays PLC concluded that drivers pay 7 cents less per gallon of gasoline because domestic refiners are passing on savings of about $3 per barrel from processing lower-cost domestic crudes. Barclays calculated annual consumer savings of more than $9.5 billion in 2013, while projecting $9.6 billion in savings this year. This analysis is based on six years of actual prices not on theoretical future lower prices that proponents of exports argue will occur.
U.S. still imports crude oil
Despite increasing domestic production, the United States imports more crude now than during the 1970s oil embargoes — almost half our daily supply. Using U.S.-produced crude here is reducing our reliance on imports. We should continue supporting this effort to achieve energy security, rather than waste this historic opportunity.
Recent geopolitical turmoil is the most telling example of why our long-standing policy of reducing dependence on foreign oil — a goal embraced by every Republican and Democratic administration for 40 years — should be maintained. Despite instability in certain oil-producing regions, prices here remain lower than overseas benchmarks due to political stability and surging domestic oil production.
To justify exports, large oil producers claim — without supporting evidence — that domestic refineries are unable to process the projected increasing supply. A recent analysis by energy expert Baker & O'Brien concludes that the U.S. refining industry will be able to absorb an additional 3.1 to 4.3 million barrels per day of domestic oil. This estimate exceeds the U.S. Energy Information Administration's high forecast for incremental oil production for the remainder of this decade. Bearing this out, U.S. refiners are expanding domestic crude processing capacity, which displaces imports.
Proponents also argue that exporting U.S. crude oil would be consistent with "free trade" and "open market" principles, claiming that exports would raise global oil supplies and thereby lower prices. These arguments ignore the fact that global crude markets are neither "free" nor "open." After all, governments or national oil companies control access to about 85 percent of world reserves. In addition, the OPEC cartel effectively distorts global crude pricing through a quota system that controls supply to manipulate prices.
History shows these restrictive practices will continue if the U.S. government lifts export controls. Further, every barrel of American crude oil exported would require a foreign barrel to replace it — increasing U.S. dependence on foreign oil.
Export advocates conveniently avoid any discussion of the Jones Act, which requires domestic crude to be transported to U.S. refineries on American-made, -flagged, and -crewed tankers. Crude exports and the Jones Act are inextricably linked, so many complicated issues would arise. For example, Congress would need to decide whether to apply the Jones Act to foreign crude shipments. Otherwise, the United States would effectively subsidize foreign companies, putting American refiners and workers at a significant competitive disadvantage.
Earlier this year, the U.S. Department of Commerce made a controversial decision to allow exports of light crudes known as condensates. In response, two U.S. Senators sent a letter questioning whether the Department acted within its lawful authority. Whatever the outcome, the executive branch is unable to go further without Congress, which limited crude oil exports in 1975. Congress alone — not a federal agency acting behind closed doors — is responsible for determining whether to change export policy, and should do so only after a deliberate, thoughtful and public review.
Voters: Keep oil here
In a recent Reuters/IPSOS Poll survey of more than 5,000 Americans in September, 68 percent of respondents believe the nation should keep oil at home to lower gasoline prices, while only 16 percent favored exporting crude oil to boost the economy.
That's because they are seeing controls on crude oil exports leading to lower fuel prices at the pump, promoting manufacturing and good jobs at home, reducing reliance on imported oil, and increasing energy security for the U.S. Our national interest demands that Congress and Obama continue supporting existing export controls on crude oil and condensates. The results show this formula is working, so let's stay the course.
