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The boom in U.S. petroleum production has led to an increasing clamour to overturn the ban on U.S. oil exports, a relic of the terrible energy policies of the 1970s.
The current agitation for exports is of more than passing interest to the Canadian oil industry, whose sales to the U.S. suffer a heavy discount due a combination of the U.S. boom and political hurdles to new pipeline construction.
However, those who support additional exports are – in the run up to the U.S. mid-term elections – facing populist concerns about the impact on gasoline prices, as well as perennial anxiety about energy security, not to mention opposition from environmental activists who want to end the age of oil.
If supporters of exports want an example of why free trade in energy is beneficial for jobs and growth, they should look to Canada, and to the benefits of reversing the misguided restrictions it imposed in the wake of the OPEC crises four decades ago.
Both oil and gas production have soared in the U.S. due to the application of fracking and horizontal drilling techniques, which enable access to previously uneconomic reserves. U.S. oil production is up more than 50% over the past five years, to more than eight million barrels per day, while imports are at their lowest level in almost three decades. Production is expected to increase to 12 million barrels a day in the next few years. All this is, to say the least, somewhat ironic under a president who is not just anti-oil but anti-Canadian oil, and in thrall to Big Green money.
Take billionaire Tom Steyer, who has claimed that there is a plot simply to export the Canadian oil pumped through the Keystone system, which the president has obligingly refused to permit. But on the one hand diluted bitumen is well suited to the refinery capacity of the Gulf Coast, so is unlikely to be exported. On the other, and more fundamentally, what’s wrong with exports?
Trade is subject to numerous primitive anti-economic beliefs. One is that energy should not be exported because it amounts to selling the nation’s birthright. After all, oil and gas are a finite resource, so flogging it to “them” means less for “us.” This folk economic belief is as reflexively embraced by Bolivian tribesmen as it is by members of the Council of Canadians.
This attitude stalked Canadian public policy in the 1970s. In the wake of the first OPEC crisis, in 1973/74, the Canadian Liberal government of Pierre Trudeau suggested to the U.S. that it might just have to do without Canadian oil in future. Around the same time, the U.S. Congress banned oil exports. Similarly, there were angels-on-a-pinhead calculations of Canada’s natural gas reserves to make sure that too much wasn’t being shipped abroad at the expense of the nation’s economic future.
For the rest of this column, click here: http://business.financialpost.com/2014/08/25/peter-foster-the-case-for-u-s-oil-exports/