The Geopolitical Case for Crude Oil Exports

The US ban on crude oil exports was a prominent topic of discussion when industry leaders and high-ranking government officials from across the globe convened in Houston in April for IHS CERAWeek, one of the energy industry’s largest annual conferences.

Indeed, over the past year the longstanding ban has emerged as one of the hottest issues in the debate on US energy policy.

In recent months, think tanks, academic institutions, and industry groups have released study after study examining the ban’s impact on the US economy, American hydrocarbon production, and global energy markets.

As the debate gained momentum, a striking consensus emerged on the economic impact of the ban and the potential benefits of repealing it. First, a range of experts from both sides of the political spectrum concluded that a small group of domestic refiners, not American consumers, are the primary beneficiaries of the crude oil export ban. Second, the overwhelming majority of scholarship determined that lifting the ban would increase production, create thousands of jobs, increase tax revenues, and boost GDP by billions of dollars. Finally, the expansive body of economic research showed that repealing the ban will decrease domestic gasoline prices by a modest amount.

This post does not seek to add to the abundant body of work on the economic impact of repealing the crude oil export ban. Rather, it aims to outline the geopolitical and foreign policy benefits of lifting the ban.

Repealing the ban will allow the United States to harness its vast natural resources to advance its foreign policy priorities in three ways. First, it will provide greater stability to global oil markets and reduce the price volatility. Second, it will limit the geopolitical influence of other major crude producers, including US adversaries. And third, it will demonstrate the United States’ commitment to free trade and open markets at a critical juncture.

In recent years, the unconventional energy revolution has put the United States and its North American neighbors in a position to become a stabilizing influence on global energy markets. North American, and especially US, crude oil production is far less susceptible to supply disruptions caused by insecurity and political turmoil than production in major exporters like Libya, Nigeria, and Russia. As a result, lifting the crude oil export ban and ensuring the stable flow of American crude into the market will diminish some volatility caused by supply disruptions in more tumultuous parts of the world.

While political unrest and violence has had surprisingly little impact on crude production in recent months, the deep instability that wracks parts of the Middle East and West Africa today could easily disrupt supply in the future. For this reason it is critical for the United States to take advantage of its hydrocarbon resources to strengthen the stability of oil markets.

The presence of more US crude oil in the market will enhance the energy security of key US partners by enabling them to diversify their supply sources. From a foreign policy perspective, this will provide an alternative supply option and mitigate commercial concerns for countries considering supporting current or future sanctions against geopolitical troublemakers.  As a result, it will increase the prospects of a sanctions regime being successfully established by a broad coalition against a US adversary.

To be clear, crude oil exports are not a geopolitical silver bullet—they will not bring Vladimir Putin’s Russia to heel nor will they strike a devastating blow to the mullahs in Tehran. They will, however, increase the energy security of crucial US allies and enhance the ability of the United States to use its energy resources to advance its foreign policy priorities.

Overturning the crude oil export ban will also demonstrate the United States’ commitment to free trade and open markets at a critical juncture. The United States is currently in the process of negotiating two major free-trade agreements, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Throughout the long and arduous negotiating process, the United States has consistently called on key partners to eliminate trade barriers and special legacy interests. The existence of the crude oil export ban is wholly inconsistent with these calls for free and open trade and undermines the credibility of US officials in ongoing negotiations.

By demonstrating its commitment to free trade, even in the politically sensitive energy sector, the United States will bolster its negotiating position and increase the likelihood that potential free-trade partners will make politically difficult concessions of their own. These concessions will be crucial to securing lasting trade agreements that enhance US prosperity and security.

The time has come to end the archaic and counterproductive policy banning US crude oil exports. The rationale behind doing so is far more than economic.

Chris Brown is a Program Assistant at the Atlantic Council’s Global Energy Center.

Image: Pumpjacks taken out of production temporarily stand idle at a Hess site while new wells are fracked near Williston, North Dakota, November 12, 2014. Over the past year the longstanding US ban on crude oil exports has emerged as one of the hottest issues in the debate on US energy policy. (Reuters/Andrew Cullen)