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Lift the Oil Export Ban to Avoid Crude Awakening for U.S. | Commentary

In Congress, there are essentially three kinds of laws: Those that achieve their intended goals; those that don’t; and those that — by flaw of design or implementation — somehow do the complete opposite of what they intended.

One example of this third kind of law is the 40-year ban on the export of U.S. crude oil.

The crude oil export ban was implemented in 1975 to insulate America from the energy price and supply shocks that crippled our economy after the 1973 Arab oil embargo. The reasons for the ban are no longer relevant, and by keeping it in place, we are actually making the U.S. less competitive and energy supplies less secure — the opposite of its intended effect.

Now, with the recent and rapid increase in domestic U.S. oil and natural gas production, it is time for Congress to lift the ban on U.S. crude oil exports.

The choice America faces is simple: We can keep exporting more U.S. dollars abroad to import more oil. Or we can lift the oil-export ban, and in the process benefit from the additional energy, jobs, tax revenue and economic growth that comes with it.

It may seem counterintuitive. How could sending U.S. oil abroad increase its availability and affordability here at home?

The answer is clear if you look at how crude oil is produced, priced and sold in our global economy. The key word is global, as the price Americans pay for oil — as well as gasoline, diesel and other petroleum products are determined by the global market for these commodities.

Fortunately, the global oil market has been transformed in recent years by the United States.

Thanks to advances in drilling technology that have opened access to previously unrecoverable shale oil and natural gas resources, the U.S. is now the number one producer of crude oil and natural gas in the world – which has created more global supply and therefore more energy security for America.

In recent weeks, news stories have noted that the U.S. energy boom has weakened OPEC’s grip on global oil markets. It’s a welcome development; but one that won’t last long if the U.S. continues to prohibit oil exports.

Much of the new oil America is producing from shale plays in North Dakota and Texas is of the light, “sweet” variety. Unfortunately, we’re fast approaching the limit of U.S. refineries’ ability to process this oil, because most domestic refineries are equipped to process primarily the heavier “sour” grades of crude oil we import from abroad. Additionally, if these antiquated laws slow down exploration, that means fewer and smaller royalty checks to private mineral owners.

If you need further evidence that America’s crude oil export ban is nonsensical, consider the fact there is no restriction on the export of refined oil products such as gasoline and diesel fuel. It’s akin to the United States banning the export of corn while allowing the export of tortilla chips.

The benefits of lifting the crude oil export ban are substantial. For starters, the nonpartisan U.S. Government Accountability Office concluded that ending the ban would likely lower domestic gasoline prices and that it could “be expected to increase the size of the economy, with implications for employment, investment, public revenue, and trade.”

Another study from IHS Energy found that lifting the ban would increase U.S. oil production from 8.2 million barrels a day to 11.2 million, while adding an average of $86 billion annually to U.S. gross domestic product between 2016 and 2030.

And then there’s the fact that between 8 and 12 million Americans receive royalty payments for oil and natural gas production that occurs on their land. This group includes family farms, foundations, teachers, retirees and small business owners, just to name a few, who support their local economies with the royalty payments they receive. Let’s do some simple math: For every additional 1 million barrels/day of U.S. oil production, priced at $70/barrel, royalty owners receive an additional $11 million in income. That’s $11 million/day, or more than $4 billion/year, in new royalty income.

These benefits are part of the reason there is growing support in Congress to lift the ban. The House Energy and Commerce Committee will hold a hearing on Dec. 11 to examine the issue and legislation to repeal the ban is expected after the 114th Congress convenes in January.

America has been dealing with the unintended consequences of the crude oil export ban for long enough. Let’s open our energy markets so we can create more opportunity for the American people.

Jerry Simmons is the executive director of the National Association of Royalty Owners and executive vice president of the Royalty Owners and Producers Educational Coalition.

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