The U.S. Needs to End Its Ban on Crude Oil Exports
We can help our allies and undermine our adversaries if we get rid of this antiquated policy.
A crisis flares in the Middle East. Russian military forces subjugate a nation desperate for freedom. Europe searches for new sources of energy.
Such was the situation in 1956. War raged over the Suez Canal, blocking shipping for half a year, and a crucial pipeline from the Persian Gulf to the Mediterranean Sea was sabotaged. Meanwhile, the Hungarian people rose up against their communist oppressors in October, precipitating a Soviet invasion days later. The Cold War turned hot and, as winter approached, American allies in Europe lost access to Middle Eastern oil.
President Dwight Eisenhower’s response was swift and resolute. Domestic oil production skyrocketed and shipments from the Gulf Coast stabilized world markets during this critical period, all to relieve what the press termed “Europe’s oil famine.” A study by the Rand Corporation in 1962 noted, “Both economically and politically (as was seen at the time of Suez), Europe’s essential energy needs involve the United States and other Western Hemisphere suppliers.” By July 1957, the crisis was over. American energy had come to the rescue.
Today, U.S. allies are once again under threat and, once again, our nation’s resource abundance places us in a position to render vital assistance.
Some of America’s oldest allies are heavily reliant on incredibly unappealing sources of oil. The International Energy Agency estimates that in 2012 the United Kingdom depended on Russia for some 12 percent of its crude oil imports, a relatively modest proportion when compared to the Netherlands (31 percent) and Poland (96 percent). All told, Russian barrels account for approximately one-third of European Union imports. Meanwhile, Italy — a refining giant in its own right — receives some 21 percent of its imported crude from Libya, one of the most unstable producers in the world. Other key partners — India, Japan, and South Korea — bank on steady access to the Middle East for some two-thirds of their oil imports, and even continue to purchase Iranian petroleum under the sanctions regime.
We can fix this, but it requires action. For more than 40 years, U.S. laws have tightly restricted crude oil exports. This regulatory architecture is a decrepit edifice that must be modernized. Sales of U.S. crude oil are uniquely prohibited by outdated statutes and regulations. Full congressional repeal of these restrictions would still duly preserve the emergency authority of the executive branch to intervene in cases of national security. Oil export policy may be liberalized without infringing on the president’s emergency powers, which derive from entirely separate laws.
The benefits to global security of allowing oil shipments to our trading partners are obvious and indisputable. Our friends in Asia, eager to comply with Western sanctions against Iran, would have a new alternative source for their energy needs. European allies, struggling to diversify away from Russia, would be able to receive U.S. domestic oil almost immediately. Unlike liquefied natural gas projects, which take years to build and cost billions of dollars, large-scale infrastructure is not necessary for the oil trade.
Allowing American companies to compete with Russian and Iranian energy will also decrease the revenues currently enjoyed by the mullahs in Tehran and Vladimir Putin in Moscow. All of this can be done without touching sanctions. Any environmental impact would also be negligible, as American oil is produced under some of the strictest safeguards on the planet.
The executive branch retains the authority, explicitly delegated by the legislative branch, to allow for shipments of domestic oil. This would be consistent with the White House’s 2015 National Security Strategy, which calls to “promote diversification of energy fuels, sources, and routes.” The president may make exemptions “based on the purpose for export, class of seller or purchaser, country of destination, or any other reasonable classification or basis,” as provided for in the Energy Policy and Conservation Act of 1975. Companies may submit applications, and the Commerce Department will consider them “on a case-by-case basis,” according Part 754 of the Export Administration Regulations, known as the Short Supply Controls. With production and storage at record highs, crude oil is arguably no longer in “short supply.”
Past administrations led by presidents from both parties — Gerald Ford, Jimmy Carter, Ronald Reagan, George H.W. Bush, and Bill Clinton — used executive authority to boost exports of refined products or crude oil when market conditions warranted. Should President Barack Obama make such a determination today, he would have our full support.
The United States is producing more energy today than at any point in its history. There is simply no reason — legal, political or economic — for our nation to refuse to sell energy to our friends and allies. We have played this role before and can do so again.
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