The United States Commerce Department recently announced it would approve a “swap” of light U.S. oil for imports of heavy Mexican oil. To many people, this news barely made a ripple. It likely signals a further development of the creation of a North American energy market, but it could also set the stage for a major shift in our nation’s antiquated energy policy – the lifting of all U.S. trade restrictions on crude oil.
The ongoing production boom in shale basins across the United States has exceeded the expectations of even the most optimistic forecasters. Crude oil production was at more than 9.7 million barrels a day in April – the highest level since 1971, and U.S. oil in storage is greater than it’s been in over 80 years. Yet, we still largely prohibit the export of crude oil – even to U.S. allies – because of an outdated policy enacted decades ago in response to concerns, genuine at the time, over growing U.S. dependence on oil imports.
Much has changed since the dark days of the 1973 Arab Oil Embargo. The U.S. now leads the world in energy production, including oil and gas. As a percentage of consumption, U.S. oil imports have fallen sharply from a high of roughly 60 percent in 2005 to 27 percent last year. The Energy Information Administration expects our dependence to continue to tumble to 14 percent by 2020, with friendly Canada and Mexico accounting for the vast majority of remaining imports.
Energy trade restrictions – designed to insulate us from the unpredictable actions of foreign energy suppliers – are no longer necessary. And while there is growing momentum for a policy change, making it happen will require further education about the free trade and national security benefits gained by the U.S. from lifting the ban. Unjustifiably blocking global access to our abundant energy supplies undermines what we have achieved as a nation since the Second World War in breaking down global trade barriers and creating economic prosperity. At a minimum, maintenance of the crude oil export ban threatens U.S. leadership in free trade.
Our energy trade restrictions may very well also violate U.S. obligations under the World Trade Organization, placing the country at risk of eventual sanctions if those policies are left in place. Even worse, it weakens our political position in challenging other nations that block U.S. access to their resources as China attempted to do with rare earth minerals, which are key to making the electronics we use on a daily basis. Maintaining our export ban sends a dangerous signal that it’s acceptable for other nations to place restrictions on their own raw materials and energy supplies.
Moreover, our allies need access to secure global supplies of U.S. oil, rather than remain vulnerable to countries often hostile to Western interests. Allowing U.S. producers to compete in the global marketplace increases U.S. leverage and helps counter the influence of countries like Russia and Iran. Assuming sanctions are lifted on Iran and that country has greater access to the global oil market, it would become a major beneficiary of the U.S. oil export ban. With U.S. oil supplies blocked from the global market, Tehran would enjoy greater political influence and revenues from its oil exports to pursue nefarious policies.
It’s time to lift the ban. We should leverage our natural resource discoveries and technological innovations to improve our leadership position on the global stage. We should unshackle our energy producers and allow them to compete in free and fair trade with their foreign counterparts – and in the process, help counter the influence of hostile countries. Free trade in energy, backed by U.S. supplies, is certainly the most effective way to deter any energy supplier from using energy as a weapon or, in the case of Iran, from using its energy revenue to gain one.
