A Crude Victory Banning America from exporting oil while allowing Iran to do it.
http://www.wsj.com/articles/a-crude-victory-1439592923
A cheer and a half for the Obama Administration for finally recognizing something the U.S. government has been denying since the 1970s: that the market for oil is global.
The acknowledgment takes the form of a Commerce Department decision disclosed Friday to let U.S. companies export domestically produced crude oil to Mexico. Technically it’s a swap, meaning that we give Mexicans crude oil in the grade they need in exchange for Mexican oil that fits our needs. The swap will help to ease a refining mismatch on the Gulf Coast that has caused America’s light crude to pile up in storage areas that are almost full because they have no place to go.
While this is a good step, it leaves the real problem untouched: the ban itself. The ban dates to the 1975 Energy Policy and Conservation Act, which Congress passed in response to that era’s oil crisis. The idea was that if we could keep oil produced within our borders for the domestic market, it would insulate Americans from price spikes.
This thinking never made sense even in the days when oil supplies were scarce and prices were rising. It makes even less sense today, when America is becoming one of the world’s leading oil and gas producers. Today the main effect of the ban is to discourage some American producers from drilling for more supply, while leading others to get around the ban by exporting their oil in the form of refined gasoline and diesel, which can be exported.
The good news is that there’s a growing move in Congress to kill the ban. Sen. Lisa Murkowski, chair of the Senate Energy and Natural Resources Committee, has introduced legislation that has moved out of committee, and Texas Republican Joe Barton has introduced similar legislation in the House. They argue correctly that eliminating the ban on exports would create jobs and add a boost to the American economy without raising gasoline prices.
There are also good strategic reasons for lifting the ban. It’s absurd to keep American oil producers from selling crude oil on global markets at a moment when the U.S. is about to lift the limits imposed by sanctions on the Iranians. Expanding the supply of U.S. oil would also provide allies in Eastern Europe with alternatives to their current oil dependence on Vladimir Putin’s Russia.
The great irony is that President Obama, who has not been shy about asserting executive power, has the authority to allow American crude exports without Congress. But he’s made no move to do so, and the Administration has been mum about the Murkowski bill.
Let’s hope the Mexico swap isn’t merely a palliative to ease the refining bottleneck and reduce political pressure to lift the export ban. If Mr. Obama won’t lift the ban, Congress should mobilize a bipartisan coalition to force the issue.
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