Numbers Don’t Lie: Crude Exports Are in Americans’ Best Interest | Commentary
Everyone knows Washington loves to study an issue to death and a lengthy study period can be fully justified when venturing into unknown territory. While it is important Congress not rush blindly into new policies, being too cautious can risk letting a golden opportunity slip through one’s fingers. For example, take the debate over ending the policy banning exports of U.S. crude oil which has been center stage on Capitol Hill recently.
Multiple congressional hearings have been held on the topic, including one to be held this week in the Senate Committee on Energy and Natural Resources, which will feature testimony on the bipartisan bill introduced by Sens. Lisa Murkowski, R-Alaska, and Heidi Heitkamp, D-N.D., to eliminate the crude export ban.
Along with committee hearings, respected think tanks and policy research organizations have also carefully examined the consequences of repeal. Last week, we released a report summarizing this extensive research effort. Our report, titled “The Economic Case for Lifting the Crude Oil Exports Ban,” examines five recent macroeconomic studies evaluating the significant domestic and international implications of ending this outdated policy.
And the research was clear: Removing the ban will boost economic growth, expand employment and put downward pressure on fuel prices. Each of the reports — from The Aspen Institute, Brookings Institution, ICF International, IHS and Resources for the Future — drew similar conclusions about the economic benefits of lifting the ban in light of America’s new energy landscape. Over the past decade, new technologies and production methods have jump-started our energy capabilities by unlocking vast new supplies of oil and natural gas. We are now the world’s largest producer of those key resources, but achieving the full benefits of that position requires our energy policies to more closely match reality.
A major theme running through the five reports we examined is that allowing crude oil exports would generate substantial increases in U.S. gross domestic product. While 4 of the 5 studies reviewed predicted significant increases in GDP, the Brookings Institution estimated that our economy could gain between $550 billion and $1.8 trillion through 2039, under different export scenarios.
Additionally, the reports concluded that if unfettered by outdated policies, the energy sector could put many more people to work nationwide. IHS estimates that between 394,000 and 859,000 new American jobs would be generated every year if the export ban were lifted. And those employment opportunities are not just at oil and natural gas companies. Two of the reports highlight the significant employment gains in other industries, such as construction and manufacturing. The Aspen Institute predicts lifting the ban on energy exports would create as many as 217,000 new construction jobs by 2017; 148,000 professional service jobs; and around 37,000 new manufacturing jobs each year over the next decade. That is the kind of community building economic growth policymakers desperately need to promote.
Finally, the reports we examined debunk the myth that lifting the ban will send domestic oil prices shooting up. The price that U.S. consumers pay for fuel depends on a multitude of factors; importantly, though, oil prices are set on the world market. The hoarding of U.S. energy supplies at home actually puts upward pressure on world prices by keeping supplies artificially low. U.S. crude oil bottles up at seaports and refineries, or is left in the ground, sitting unused, rather than going into the global supply chain and helping stabilize market prices.
The economic research supporting a change in policy should not be overlooked. However, noteworthy national security and geopolitical benefits also will follow from ending the ban on crude oil exports, as a recent Columbia University report concluded. By participating fully in the global market, the U.S. will have a hand in building a secure energy future not only for us, but also for our allies, thus strengthening our geopolitical ties with the rest of the world.
It is clear the original rationale for restricting crude oil exports no longer applies. We now find ourselves poised to become a major player on the global energy stage with the ability to take on a leading role moving forward. If we move too slowly to take full advantage, Russia and other nations will step up to fill the void.
Repealing this outdated ban is not the energy policy equivalent of sending human beings to Mars. It is a straightforward issue that already has been studied extensively and, if not acted upon soon, could be costly both economically and geopolitically. Now is the time for Congress to act.
Margo Thorning, Ph.D., is the senior vice president and chief economist for the American Council for Capital Formation. William Shughart, Ph.D., is the research director at the Independent Institute and J. Fish Smith Professor in Public Choice, Huntsman School of Business, Utah State University and Strata Fellow.