Nothing succeeds like success. Unless, of course, you’re the Obama administration.
The success of hydraulic fracturing – “fracking” – for the purpose of oil production in the U.S. has been nothing short of spectacular. Oil is flowing as freely as 99-cent margaritas at Stations Casinos. And, believe it or not, after decades of dependence on foreign oil, that is causing a huge problem.
“Oil is overflowing U.S. storage facilities partly because of the 40-year-old export ban,” explained Holman Jenkins in a recent Wall Street Journal column. “The wave of bankruptcies and layoffs that many have predicted for the U.S. energy sector may finally be coming, but less because of the distressed price of oil than because producers will have to stop producing if they have nowhere to send their output.”
That’s right. After years of sky-high prices and American motorists being held hostage by Middle East oil barons, U.S. energy companies are unable, by law, to export oil which would raise tax revenue without raising taxes and lower unemployment without lowering wages.
Indeed, as Bill Loveless reports in USA Today, the U.S. has reduced its oil imports from 60 percent to 27 percent since 2005, and two-thirds of what we still import comes from our neighbors and friendly partners, Canada and Mexico. That’s a good thing.
But as Loveless explains, without getting too technical, what the U.S. is producing today is “light sweet” crude while many of our refineries in the Gulf Coast are set up to refine “heavy sour” crude, like that produced by Mexico and Venezuela. That means it’s necessary for the U.S. to continue to import some heavy crude, which also means we’re producing a surplus of light crude.
The solution, of course, is to repeal the ban on the export of America’s light crude oil which, as Loveless explains, was “enacted by Congress in response to the Arab oil embargo, supply shortages and gasoline lines” from four decades ago.
“There would be major benefits from crude oil exports,” maintains Ryan Lance, CEO of ConocoPhillips. “In the world market, light oil sells for more than heavy oil. So the U.S. would gain by exporting our surplus light oil, and then importing the less expensive heavy oil that our refineries are built to handle.”
One of those major benefits would be cheaper gas prices at the pumps, a gift from the heavens for motorists who also happen to be voters. Hello?
“The law banning crude oil exports prevents crude oil producers in the U.S. from participating in free trade of a commodity that is traded worldwide,” declares Alex Mills of the Texas Alliance of Energy Producers. “It should be lifted or we will likely see the oversupply of crude oil continue to grow and drive prices below costs for a large number of producers.”
“Prices below costs” sounds good on the surface. But in reality this means the business is losing money. And businesses that lose money go out of business which means those businesses no longer generate tax revenue and no longer employ workers who then start costing taxpayers money instead of paying taxes.
Indeed, Meagan Parris of Chem.info reports that “According to an estimate by the Federal Reserve Bank in Dallas, Texas alone could lose 140,000 jobs in the next year as the slowdown in oil production impacts the state’s entire economy.”
The export ban maybe made sense in the 1970s. No longer so. It’s time for President Obama to push for its repeal. It’s what’s best for business and it’s what’s best for America.