Before Lifting Iran Oil Sanctions, Lift Export Ban
As Congress begins its 60-day review of President Obama’s nuclear deal with Iran, there are plenty of reasons to be skeptical about whether it is in our nation’s – and the world’s – best interests. Not least among them are the underexplored, but potentially significant consequences the deal will hold for American energy producers.
By agreeing to lift sanctions on Tehran’s oil exports, the Obama administration will allow Iranian oil to enter the world market while at the same time continuing to deny our producers that same access and right of competition.
The outdated laws and regulations preventing the United States from exporting crude oil are grossly outdated – and, in the wake of the Iran deal, amount to sanctions against ourselves. This has unfortunately been the case throughout the nuclear negotiations. Iran has been selling over one million barrels per day of oil to our trading partners, such as Japan, South Korea, India, and others.
Meanwhile, Americans are prohibited, with only minor exceptions, from exporting oil anywhere but Canada. Iran’s export terminal at Kharg Island can load oil tankers with various grades of crude and send that oil far and wide, but it is against the law to do the same thing in the port of Houston with American light sweet crude. What’s good for Froozan Blend is not, apparently, good for West Texas Intermediate.
This disconnect makes no sense and harms the economic and strategic interests of the United States. Because global oil prices are higher than domestic U.S. prices, countries such as Saudi Arabia and Russia can make more money selling their oil on the world market than American companies in Alaska, North Dakota, and Texas. We don’t see cheaper gasoline at the pump, though, because those prices are set by the global market.
If the current sanctions are ultimately lifted, Iran’s export resurgence will increase the world’s oil supply and decrease oil prices. The Energy Information Administration estimates that as many as one million additional barrels of oil from Iran could enter the market each day. As a result, American drillers will be even further disadvantaged. That will put negative pressure on our production and on related infrastructure projects, which depend on production coming online.
Maintaining our export ban has today become outright indefensible. The United States is the only advanced nation that generally prohibits oil exports. Our allies in Australia, Britain, Canada, Italy, New Zealand, and the Netherlands all produce, import, and export oil at the same time.
I have introduced bipartisan legislation to lift the ban on oil exports. This would allow Americans to export oil on the same basis that domestic refiners already export gasoline, diesel, and jet fuel. While we consider full repeal of this 40-year-old, antiquated energy policy, President Obama also retains statutory authority given to him by Congress to authorize greater exports.
A bipartisan group of legislators has requested that he grant an exemption from the ban for Mexico, for example. The President may also authorize oil exports to our allies in Asia and Europe if he determines that it is in the national interest. No legislation would be required, although that remains the best solution over the long-term.
As congressional review of the Iran deal begins in earnest, it is important that we consider the unintended consequences of allowing an increase in Iranian oil on the world market without allowing exports from the United States. American oil enhances global security and sustains economic growth, while Iranian oil empowers our foes and imperils our friends. We should lift sanctions on American oil before we lift them on Iranian oil.