Export Ban Marginally Decreased

By: Colin Combs

Recently, the U.S. Department of Commerce’s Bureau of Industry and Security expanded its definition for acceptable forms of shale oil to be sold abroad to include a form of ultra-light oil known as “condensate”, which has gone through a “stabilization” process in a distillation tower to strip it of lighter gases, making it less volatile and safer for storage relative to other ultra-light oils but without refining it to the degree of making it ready for use. They argue that this process no longer classifies condensate as crude oil, thereby exempting it from the ban that was put in place by the Energy Policy and Conservation Act of 1975 (EPCA) that forbid most forms of crude oil exports except for when specific licenses to do so had been issued by the Department of Commerce. This measure, along with the establishment of Department of Energy’s Strategic Petroleum Reserve (SPR) were put in place in response to the 1973 Arab oil embargo to try and keep as much crude oil inside the US as possible, thereby promoting “energy independence”.

If all that sounded insanely technical and bureaucratic, that’s because it is.

Unfortunately, it does not appear that further deregulation is close to hand as, according to Fox Business,

“Congress is not expected to pass legislation lifting the ban on crude exports before the Nov. 4 elections, as no lawmaker wants to be blamed for a move that could boost U.S. oil prices.”

While C4L applauds all movements, however small, to a freer society, big moves are still better than small ones, and that requires dedication to the principles of freedom. But what’s so bad about wanting to keep oil in America? And the answer is there’s nothing wrong with it at all, as long as the reason the oil remains in America is that the American consumers choose to purchase enough American oil that it makes sense for American oil producers sell all their oil domestically.

Voluntarily made exchanges are always necessarily mutually beneficial. Unless each trader expects to benefit, they will not consent to an exchange. So any time the government blocks people from making voluntary trades, it’s preventing each party from engaging in a mutually beneficial transaction. By making these decisions for us, the state just makes us worse off.

But what about having a cushion against foreign disruptions? Again, a balance is struck here by the free market between the costs of both storage and time against the risk of future supply problem, this time by the all too often demonized speculator. When speculators see these supply problems arising in the future, they purchase more of this good now while it’s cheap so they can sell it in the future when it’s more expensive, consequently raising its price in the present and lowering it in the future. If they are wrong about the future and have kept these goods off the market for no reason, they, not the taxpayer, suffer losses as a consequence of their mistake. This whole process provides a market-based check and balance, and it is precisely this balance that is missing when this function is handled by the state instead of by the speculator. They face no risk for failure, and therefore have no qualms against bidding the price of oil up with taxpayer dollars much higher than is necessary.

If one really wants to find the best way to conserve resources, as always the answer lies in the free market, not in the state.