The hard truth behind America’s archaic crude oil embargo

Ask most Americans and they’ll agree there’s a broad divide between Washington and Main Street. According to a Gallup Poll earlier this fall, trust in the federal government to handle international and domestic issues has fallen to a record low.

Considering the Obama administration’s apparent deference to ideology over evidence, we can see why confidence in Washington has plummeted. Take, for example, the ongoing debate about easing restrictions on U.S. crude oil exports.

{mosads}While Energy Secretary Ernest Moniz is dismissive of the reality that prohibiting U.S. exports is partly responsible for the global crude oil glut, all signs from the field paint a very different picture and add to the urgency for Congress to take action now.

As the price of oil has tumbled from more than $100 per barrel to as low as $40 over the past year, the number of active drilling rigs in the United States has decreased by 60 percent to a five-year low. The oil and gas industry has cut more than 90,000 jobs since last summer, a number that could double if the export ban is not lifted. According to the Energy Information Administration, domestic production has been declining steadily for the past 10 weeks.

At the same time, the country’s crude oil stockpiles are at their highest levels in 80 years while prices have hit a six-year low.

The slowdown in the energy sector isn’t only bad for oil and gas producers, it puts American families and businesses at risk as well. Oil and gas activity supports more than 9.3 million jobs and generates about $1.2 trillion in GDP each year, which extends far beyond production fields. What’s more, a report by the Progressive Policy Institute finds six of the top 25 companies that invested in the United States last year were from the energy sector, with a capital expenditure of $43.6 billion.

Capitol Hill seems to get it. The House of Representatives has voted 261-159 to lift the ban, and a vote in the Senate is pending. But before the issue even came to a vote, President Obama promised to veto the legislation, saying it is “not needed at this time”—which begs the question if not now, when?

Other countries are taking advantage of the U.S. export ban by stepping up their own crude oil output. Production in Saudi Arabia and Russia is at record levels despite lower prices. And Obama’s proposed nuclear deal with Iran will enable that country to quickly ramp up production by as much as one million barrels per day.

The president’s motivation is difficult to fathom. Is this just another example of America disengaging from the world stage, or is he kowtowing to the environmental community as he reinforces his commitment to so-called “green” energy?

Whatever the case, the president is putting America’s oil and gas industry at risk along with millions of jobs and billions of tax dollars. For example, a recent ICF International report finds lifting crude oil restrictions could generate as much as $13.5 billion in federal, state and local tax revenue by 2020. Another study projects the energy industry could create as many as 1.3 million jobs up and down the supply chain by 2030 under pro-development policies. And, significantly, a wealth of research, including that done by the U.S. Department of Energy, confirms that repealing the ban would likely result in lower, not higher, prices at the pump.

As Congress begins to wind down over the next month, there are several key legislative vehicles, such as the Highway Trust Fund legislation and omnibus spending that could be used to advance and modernize our energy policies.

At present, a plurality of Americans – 45 percent according to a Reuters poll this year – support lifting restrictions on U.S. crude oil exports. The Obama administration and Capitol Hill should take heed and recognize that being the world’s energy superpower gives America tremendous economic and political leverage—if only we choose to use it.

Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University in Dallas.