EDITORIAL: Compromise may liberate American oil prosperity

OPINION:

A compromise on the 40-year-old ban on oil exports is working through the toils of Congress, and in exchange for liberating oil the Republicans have agreed to put more money into “green energy” subsidies. It’s not the best of solutions; green energy has so far enriched mostly crony capitalists. But the possibility of putting the growing glut of gas and oil — a product of the shale-oil revolution — on the world market argues well for the American economy.

The ban on exports, demonstrating once more that when a law gets into place it’s difficult to get rid of it even when conditions change — dates from the 1970s. The world was then in a full-on panic, with long lines at gasoline stations and nearly everyone saying the world would be permanently at the mercy of the Arab oil sheiks. The world was running out of oil, gasoline would rise to $10 a gallon and America would have to bring back the coal-burning passenger trains, and maybe the horse. Now it’s the Arab oil sheiks, terrified of drowning in the glut, who are begging for mercy.

The leading OPEC producers are pumping oil as fast as they can, shredding world energy prices, all to protect market share. They obviously see the Americans re-entering the market, particularly in Western Europe. The Saudis see their coveted ability to set the price of oil dissolving as American technology opens new ways to retrieve gas and oil from shale deposits that only yesterday were beyond the reach of the drill bit. Exporting oil may even cool Saudi fervor for sponsoring radical violent Islam.

The U.S. production boom in Texas, the Dakotas and Montana, now surpasses more than a million barrels of crude oil every day. Current law permits the export of half a million barrels a day from Alaska. As the largest consumer of oil, the United States, even during an economic downturn, burns 19 million barrels of oil a day, according to estimates of the U.S. Energy Information Administration.

Although the Saudis can produce oil for pennies on the barrel, their wells have not crippled the American shale producers. American technological innovation continues to make leaps of efficiency in shale productivity and moderate world demand, in a period of economic “malaise,” has so far protected the new industry.

The oil glut, however, keeps the price of crude low and keeps a lot of rigs on standby. Fortunately for everyone, the new crudes are mostly light crude, not the heavy crude the Texas refineries were designed to handle from older U.S. fields and imports from the Caribbean. The foreign refineries welcome such crude.

The lifting of the export ban would produce an immediate increase of jobs in the oil transportation market, and for suppliers of equipment and parts needed for the exports. The Aspen Institute estimates that this would mean 630,000 new jobs, and an additional $165 billion annually in the Gross Domestic Product, over the next six years.

The compromise legislation is at the mercy of a Congress trying to get out of town for the Christmas holidays. Not everyone is pleased by the happy developments, of course. Some investors in oil stocks are barely holding back tears. But cheap energy has always made America prosper, and that hasn’t changed even if some of the players have. Producers of electricity are turning from coal to natural gas, or combinations of natural gas and coal gas, and the gains in trimming emissions are already obvious.

So are the prospects of prosperity fired by sharing the wealth of America’s abundant natural resources.