Repealing Crude Export Law Would Sanction Consumers

Oil export advocates have a new meme, characterizing U.S. crude oil export restrictions as “sanctions” upon them – and comparing them to the real sanctions the United States has placed on Iran.  This is a simplistic and false comparison, not a serious argument for repealing a 40-year-old policy that bolsters our energy security and independence when we continue to import 47 percent of our crude oil.

Crude oil is uniquely strategic – an essential commodity to the security of the United States.  The mere existence of a Strategic Petroleum Reserve should make that clear.   On many occasions, Congress has passed laws that overwhelmingly reaffirm the national policy goals of energy independence and security.  Most Members of Congress have made statements on the record supporting those goals, and many voted for them, in the 2007 Energy Independence and Security Act.

Why is crude so important?  The American economy runs on products derived from crude oil.  For the foreseeable future, petroleum products will be the main source of power for the cars we drive, the planes we fly, and the trains, trucks, and ships that carry our products.  Many Americans, especially in the Northeast, also depend on fuel oil to heat their homes.

The price of crude is the most significant factor dictating what we pay for those fuels.  A gallon of regular gasoline that consumers purchase at the pump, for example, has several component costs, most of which are relatively fixed, such as taxes, refining, distribution and marketing.  By far the biggest component of that pump price is the price of crude oil, typically accounting for around 50 percent of the cost of a gallon of gas.  Of all the components of gasoline, crude’s price fluctuates the most, and gasoline’s price fluctuates accordingly.

Crude oil is important to our economy, but unfortunately, we’re not independent from external forces that can affect the availability and affordability of crude.

Policymakers would do well to heed the aphorism, “Those who forget the past are doomed to repeat it.”  After Egypt and Syria launched a surprise attack on Israel in 1973, Saudi Arabia and other Arab members of the OPEC oil cartel imposed an oil embargo on the United States for its support of Israel during the Yom Kippur War.  Then, as now, the Middle East was in turmoil.  The price of crude skyrocketed by almost 400 percent.

As we have unleashed a shale oil boom in recent years, American crude production has risen to levels not seen since 1972, when the United States experienced record domestic oil production.  Ironically, that record production came on the eve of the oil embargo, which no one foresaw.  Yet today we are importing more crude oil from the Middle East than we did at the time of the embargo – even with today’s shale boom.

A comparable “oil shock” today would push oil prices up to $200 per barrel.  Sound far-fetched?  At the beginning of 2014, did anyone think we would end the year with crude prices cut in half?  And how well have we predicted the course of events in the Middle East – did anyone predict the Arab Spring?  Does anyone know what regimes might fall next or what new conflicts might arise?  How much Middle Eastern oil might be taken off line in the coming years, either deliberately or as a consequence of conflict or mismanagement?

These considerations explain quite well why restrictions on exports of domestic crude oil remain.  The Middle East (as well as other oil producing regions) is an uncertain, unstable place, and we still rely on their oil.  That’s why Republicans and Democrats alike haven’t repealed the law.

Today, the pro-export lobby is lamenting low oil prices.  But consumers aren’t.  They’re rejoicing, and the Energy Information Administration says they’ll save $700 per household this year because of lower fuel prices – some will save dramatically more.  Consumer confidence and spending are higher than otherwise because of lower fuel prices, and our economy may see a one percent boost to GDP because of it.

Average Americans want low oil prices for their families, and they want energy security and independence for America.  Restrictions on crude oil exports serve both those purposes.  Supporters of repealing the crude export law are simply ignoring the wishes of the voters.


Jay Hauck is the Executive Director of The CRUDE Coalition, a group of merchant refiners that includes Alon USA, Monroe Energy, PBF Energy, and Philadelphia Energy Solutions.


Morning Consult