US oil drillers are demanding export satisfaction. Energy Secretary Ernest Moniz threw down the gauntlet last month, effectively challenging the industry to make the case for ending a ban on shipping crude oil abroad. Producers have laid out fresh evidence this week of benefits to gross domestic product and jobs. Even if overstated, it's a unique battle Big Oil needs to fight.
A prohibition on exporting oil made some sense when it was imposed in the 1970s, after the Arab oil embargo led to shortages. At a time of soaring US oil production, however, it has become a wasted opportunity. A domestic glut has arisen and largely explains why US oil still sells for about six per cent less than the global Brent price. American refiners lack the capacity to process all the light sweet crude drillers produce.
The higher price that could be generated, says the American Petroleum Institute trade group, would boost US oil production by up to 500,000 barrels a day by the end of the decade. That would lead to 300,000 extra jobs and a $38 billion boost to gross domestic product in 2020. US drivers might even save about $5.8 billion a year, goes the sales pitch. While domestic oil would be costlier, the global price, on which US gasoline prices are based, would fall slightly as output rises.
Some of the figures sound optimistic, to say the least, from a group with a swagger habit. America's oil industry is already growing at breakneck speed, with output up 54 per cent since 2009. Even with higher domestic prices, the pace of growth may be limited by labour and equipment shortages. And, whether a slight increase in US output will really tilt international prices lower in a vast global market is questionable.
The broader industry logic is nevertheless hard to fault. What's more, the challenge by Moniz flips the traditional burden of proof on its head. Industries aren't normally required to demonstrate why they should be allowed to sell their wares overseas.
In fact, the United States has traditionally been a champion of free trade. That means it really ought to be up to Congress and the president to show why oil exports are harmful. They might find it hard to parry.
