Thanks to President Obama’s nuclear agreement with Iran, yet another mischief-making country will soon be able to export more oil. Countries that need oil, including U.S. allies, may buy it, funneling billions of dollars into Iran. Were the United States able to provide those countries with an alternative source for crude oil, they might give Iran the cold shoulder rather than their cold cash. But the United States can’t, because federal law prohibits exporting crude oil.
Before the United States and European Union imposed sanctions on Iran in 2012, the country exported about 2.6 million barrels of crude oil daily. Exports dropped to about 1.4 million barrels a day after the sanctions, but a sanctions-free Iran would add another million barrels a day to that total.
If Iran were the only mischief-maker exporting oil, that would be one thing. But according to the U.S. Energy Information Administration, Russia exports about 4.8 million barrels daily and Venezuela another 1.4 million. And, of course, the Islamic State is selling oil to finance its reign of terror.
But not the United States, because of gasoline shortages in the 1970s.
In response to long gas lines, Congress banned exporting U.S. crude oil. Like many of Congress’s knee-jerk responses, the export ban had no impact on those gas lines. Congress didn’t ban the export of gasoline, which cars can use, but crude oil, which they can’t.
Eliminating the ban would allow U.S. producers to sell oil elsewhere if it made economic sense.
For example, crude oil has to be refined. The problem is that many U.S. refineries are set up to handle a heavier grade of crude oil than the sweet light crude coming from most of the newly produced shale oil deposits. So selling that oil to a country with refineries set up to handle it might make more sense than shipping it across the country or waiting until a U.S. refinery can take it.
And it would give other countries a more reliable source of crude oil. Venezuela’s economy has pushed the self-destruct button, and it’s unknown how long it can meet any oil-export commitments. Russia’s oil and gas exports come with political strings attached.
U.S. crude oil producers could increase production so countries that want to import U.S. oil can, undercutting mischief-makers which use their oil profits to expand their influence.
Fortunately, the United States has taken steps toward allowing exports. The Obama administration has permitted the export of condensate, an ultra-light crude that takes little processing, and has approved limited crude oil exports to Mexico.
But the White House is concerned that lifting the ban completely would raise gasoline prices — although many economists and the Government Accountability Office dispute that claim.
Regardless, a few-cents increase in gasoline costs is the least of our worries.
Energy will be produced. The question is: Who will sell it to whom? Thanks to the president’s nuclear agreement with Iran, Iran will sell even more oil. The president should let the United States compete against Iranian exports, mitigating the country’s efforts to fund its political mischief.
Congress may not consider Russian and Venezuelan oil exports worth challenging, but surely expanded Iranian exports are a problem. Fortunately, the United States has the resources and oil reserves to beat the Iranians at the export game — if only the White House will let us play.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow at twitter.com/MerrillMatthews© Copyright 2015 Tanna K, All rights Reserved. Written For: Tinytown Unleashed