The world looked very different 40 years ago when Congress forged the Energy Policy and Conservation Act (EPCA) that would be signed into law one year later, in December 1975, by President Ford. The Act was a matter of national urgency after the 1973 Arab oil embargo created domestic shortages, politically toxic lines at gasoline stations, and, practically overnight, pushed crude prices up some 400 percent.
Motivations for the Act’s sweeping provisions to conserve and control energy markets were also fueled by the fact that, after nearly a century of unbridled growth in output from American oil fields, the half dozen years prior to 1975 saw, for the first time, a reversal and precipitous decline in U.S. crude production. At the same time, domestic oil consumption continued its rise, leading to soaring importsâ€”with the economic and geopolitical implications obvious to all. Given such conditions, it was understandable that the EPCA would also implement a ban on crude exports by American firms, driven, as it was, by concerns over import dependency and shortages.
Now, nearly a half-century later, conditions have changed dramatically. The United States has emerged as the world’s fastest growing oil-producing nation, with the country’s import dependency disappearing no less fast. What caused this permanent, secular shift in oil markets? New technologies deployed by thousands of small and mid-sized businesses. Yet current American oil policyâ€”a misguided mix of thinly veiled industrial planning and state control over a major segment of the U.S. economyâ€”remains locked in historical time warp.
Encouragingly, the first hint of political recognition of America’s new energy realities came this June when the Wall Street Journal reported that a “U.S. Ruling Loosens Four-Decade Ban On Oil Exports.”
Nevertheless, the headline is misleading: the provisions of the EPCA that prohibit American companies from exercising the right to sell crude oil overseas have not changed. Instead, the U.S. Department of Commerce was merely exercising its EPCA case-by-case authority over the oil export market by granting limited waivers to just two U.S. companies, while re-affirming that there has been “no change in policy on crude oil exports.” Only a handful of such waivers have been granted in 40 years.
Still, the Administration’s action is a positive step towards what should happen: a wholesale legislative reversal of the export ban, such that productive U.S. companies do not have to beg federal permission to sell their products to willing buyers around the world, where demand is surging.
As this Issue Brief will argue, the time has come to revoke the 40-year-old law’s ban on oil exports. Such action would open up world markets to all of the small, mid-sized, and large American oil companies (not merely the occasional few that win Washington’s regulatory lottery), unleashing yet more production, generating billions of dollars of tax revenues, creating millions more jobs, and reshaping global geopolitics.