Eight days after being inaugurated as the 40th president of the United States, Ronald Reagan signed an executive order eliminating price controls on crude oil and petroleum products implemented to increase domestic production and reduce energy demand.
“For more than nine years, restrictive price controls have held U.S. oil production below its potential, artificially boosted energy consumption, aggravated our balance of payments problems, and stifled technological breakthroughs,” Reagan said. “Price controls have also made us more energy-dependent on the OPEC nations, a development that has jeopardized our economic security and undermined price stability at home.”
[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]We should finish what Reagan started 34 years ago and repeal the ban on exporting crude oil.[/mks_pullquote]
Today, U.S. oil production is higher than any other country’s in the world, the trade deficit trend is turning around, technology has reinvented the oil and gas industry and we’re less dependent on OPEC nations. We should finish what Reagan started 34 years ago and repeal the ban on exporting crude oil.
Technological breakthroughs, such as hydraulic fracturing and horizontal drilling, have transformed the industry just as Reagan imagined, and vast reserves of oil and gas have been unlocked right here at home. Yet our energy policies are still based on a scarcity of resources at a time of abundance, and environmental policies are based on old techniques and tools while ignoring modern technologies that produce oil and gas safer and cleaner.
Exceptions to the oil ban exist, such as exports to Canada and exports of heavy California oil up to 25,000 barrels per day (bpd), but as new domestic light sweet crude oil has already displaced the imported variety, there’s little place for it to go with the U.S. refining system configured for lower-quality crude oil. Investments can be and have been made to handle more of this crude, but demand a discounted price for our domestic producers and supply chain to be economic. In addition, while North America’s supply is on the rise, domestic demand is actually shrinking. If nothing else, lifting the ban simplifies our energy policy and prevents artificial market distortion.
According to four independent studies, gasoline prices would decline anywhere from $0.02 to $0.12 per gallon. That’s not a lot, considering recent drops, but none project an increase because they recognize that gasoline trades at world prices, and lifting the oil ban increases world oil supply, thus lowering prices. And while price volatility is normal for commodities, the recent price collapse demonstrates just how vulnerable we still are to OPEC controls and serves as a reminder that, just as OPEC can oversupply and drop prices, they can just as easily curtail production to create price spikes. U.S. production available to global markets would provide supply, and thus price stability.
Increased supply from American industry not subject to government controls (OPEC) and civil unrest (Middle East and Africa) has already shown this to be true. Since 2009, there has been just under 3 million bpd of lost oil production due to outside forces, which has been offset by an increase in U.S. production of over 3.5 million bpd.
[mks_pullquote align=”left” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]In my home state of North Dakota, when crude oil production increased from 172,000 bpd in 2008 to 860,000 bpd in 2013, per capita income increased from $40,917 to $53,182, while the entire U.S. went from $40,873 to $44,765 over the same time period.[/mks_pullquote]
There are other benefits to lifting the ban, such as giving our trade agreement negotiators more leverage while they’re seeking terms to boost other industries across our economy. Plus, I’ve said it in debating for more natural gas exports to our allies, and I’ll say it again for crude oil exports: Why not offer the peaceful tool of energy to release our friends from the captivity of other energy sources like Russia? Ukraine, and to a significant degree, the rest of Europe, is captive to plentiful Russian energy that limits its response to a country trying to change national borders by force. If we don’t want to send troops, arms or technology, the least we can do is sell our abundant oil and natural gas resources to our fellow freedom-seekers.
Last and most certainly not least are the good-paying jobs created by lifting the crude oil export ban. Those studies I mentioned before average an estimated 400,000 new direct and indirect jobs by lifting the ban in an industry that pays salaries on average seven times higher than the minimum wage. In my home state of North Dakota, when crude oil production increased from 172,000 bpd in 2008 to 860,000 bpd in 2013, per capita income increased from $40,917 to $53,182, while the entire U.S. went from $40,873 to $44,765 over the same time period.
From growing our influence in a world looking for leadership to creating economic prosperity, the U.S. would benefit from finishing the job that Reagan started.
This column originally appeared in The Hill.