Sounding more like a free-market economist than the thoroughly establishment analyst that he is, Blake Clayton, writing for the Council on Foreign Relations (CFR) in a paper published last week, built a carefully crafted case for the elimination of all federal controls on exporting crude oil. Clayton, who received two master’s degrees from the University of Chicago and Cambridge University along with a doctorate from Oxford, was blunt: “Federal lawmakers should overturn the ban on exporting crude oil produced in the United States.” He noted:
Removing all proscriptions on crude oil exports, except in extraordinary circumstances, will strengthen the U.S. economy and promote the efficient development of the country’s energy sector.
He’s referring to the 34-year-old ban on crude oil exports enacted during the 1970s, which reflected concerns about energy independence in light of the Arab oil embargo that led to high gasoline prices, shortages, and long waiting lines at gas stations. The series of enactments which began with the Energy Policy and Conservation Act of 1975, which was followed by the Export Administration Act of 1979. These acts have morphed into rules that are now referred to as “short supply controls,” and have placed the final decision on the licensing of crude oil exports in the hands of the Bureau of Industry and Security (BIS), a department buried deep inside the Commerce Department. According to those rules, the BIS
will review … applications to export crude oil on a case-by-case basis and … will approve such applications if BIS determines that the proposed export is consistent with the national interest.
This is important to know, according to Clayton, because such a bottleneck, manned by unknown bureaucrats with little accountability deep in the bowels of a huge government agency, makes it nearly impossible for potential exporters to ship excess crude oil overseas. And as the United States continues to expand its ability to produce new supplies of crude, it will increasingly need to find foreign buyers. With the present cap in place, however, incentives to continue to explore and expand the country’s potential oil shale resources will be dampened and diminished severely in the next couple of years. In a word, the bureaucracy could end the oil boom single-handedly.
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