In a political season peppered with tests of ideological orthodoxy, positions on the proposed end of a US ban on crude oil exports should be instructive.
The Republican Party is tearing itself apart with absolutism on issues such as immigration and gun control, while the Democratic Party acts the same way, without the intramural rancor, on climate change and the other side of gun control. With these and other complex questions, nuance gets shouted out of the room. That's regrettable. Nuance can illuminate paths to greater wisdom.
On some issues, though, nuance merely offers haven to the noncommittal. It performs no useful purpose in discussions of the crude-export ban, the essence of which is market freedom. For any official or politician, this either is or is not a priority. On market freedom, middle ground is just mush.
Restricting trade
To prohibit the export of crude oil is, by definition, to restrict trade and market operation. Congress knew that when it toughened export controls with the Energy Policy and Conservation Act of 1975 and Export Administration Act of 1979, requiring licensing of most crude exports. Rightly or not, lawmakers thought other interests more important than markets. The Arab Oil Embargo of 1973-74 and Iranian revolution of 1978-79 had shown the perils of import dependency and made confining domestic production to local use seem sensible. Oil, under assumptions of the day, was too important to leave to whims of the market.
Yet hardship from those upheavals didn't end until the government acknowledged its mistakes and allowed markets, finally, to work. The ban on crude exports is a vestige with a doubtful purpose invalidated by events. It prevents variously valuable crude oil from flowing to refiners that value it most. And because nothing limits product exports, the crude ban skews price relationships. It thus keeps markets from working efficiently and impairs development of supply.
Lawmakers, regulators, and political candidates who profess to believe in markets should be eager to end the export ban. How, in an era when saluting markets is politically fashionable, can there be any hesitation?
The answer to that question, of course, is that environmental activism fabricates a new reason to limit market freedom. People are supposed to be panicky over chances for dangerous global warming caused by a build-up of greenhouse gases in the atmosphere. Polls indicate most people are not so afflicted. Temperature observations at odds with model predictions make panic unwarranted. With the approach of a climate-change summit in Paris this December, though, political leaders-hilariously many of them claiming leadership of the issue-act frantic.
A bill passed by the House of Representatives to end the crude-export ban therefore faces problems in the Senate. White House advisors have recommended President Obama veto any such legislation that reaches his desk. Allowing crude exports would realign US and world crude prices and stimulate domestic production, they reason. This would be unacceptable. To the Obama administration, precaution against the ambiguous threat of dangerous warming means oil and gas should stay in the ground.
Promoters of this view ultimately must answer to the economic value destroyed by refusal to develop commercial resources and to the costs imposed by forced adoption of noncommercial energy. Those reckonings will present themselves soon enough if the administration stays on its current course with energy and the environment.
More immediately, political campaigns are in progress, the principals of which need to demonstrate whether they have or lack confidence in markets. For the US economy and energy consumers, the stakes are much higher than most Americans seem now to understand.
The test
Here, for political candidates, is the test: Will you demonstrate your commitment to market efficiency by supporting an end to the ban on crude exports? Or do you consider market freedom less important than sacrificing wealth and welfare to fear about climate change absent any assurance that the action will be effective?
Answers would reveal much.
