Gambling With America’s Energy Security
BY BEN GOTTESDIENER
In October 1973, Egypt and Syria, with the support of other Arab states, launched an attack on Israel, sparking the conflict that would later be known as the Yom Kippur War. The United States provided Israel with both financial aid and military aid throughout the war, but their support had consequences. Specifically, the Organization of Arab Petroleum Producing Countries (OAPEC) retaliated by imposing an export embargo of petroleum on the United States and cutting petroleum production by 25 percent. In the span of a month, oil, the worlds most precious resource, became a political weapon.
The 1973 oil embargo squeezed global oil supply and quadrupled the price of oil, nearly crippling the American economy in the process. With the dangers and vulnerability associated with dependence on foreign sources of energy clear, the American government banned exports of American oil outside of North America in 1975. The policy ensured that all oil being produced in the Untied States was used to power the American economy, and was intended to limit the vulnerability associated with the United States’ dependence on foreign energy and mitigate the use of oil as a political weapon. The ban still exists today.
America’s dependence on foreign energy was born as domestic consumption began to outpace domestic production in the late 1950’s. Many of the oil fields in Texas and Oklahoma that had been powering the American economy were maturing and production was waning; by 1973, domestic production of oil peaked and began to decline. In turn, the countries in the Middle East with massive reserves began ramping up production to meet global demand—the Middle East became the epicenter of global energy production.
Recently, the United States has experienced a boom in energy production. Huge swaths of land rich with natural gas have been discovered, and new technologies have catalyzed growth in domestic oil production. As a result of this boom in domestic production, many believe American energy independence is on the horizon, and argue that it is time to lift the ban on American oil exports. A recent article by Blake Clayton of the Council on Foreign Relations, “The Case for Allowing U.S. Crude Oil Exports,” encapsulates the largely economic argument in favor of lifting the ban. The author argues that “Removing all proscriptions on crude oil exports, except in extraordinary circumstances, will strengthen the U.S. economy and promote the efficient development of the country’s energy sector…Exporting energy is good for the economy. Crude oil exports could generate upward of $15 billion a year in revenue by 2017 at today’s prices, according to industry estimates.” Clayton goes on to argue that energy companies will receive a much-needed boost by selling oil at higher world prices and that the increased rewards to production will incentivize further domestic production growth and benefit domestic refineries.
The ban, however, was never intended to produce economic growth – it was meant to protect the energy dependent United States from the vulnerability stemming from its reliance on foreign energy. Clayton’s argument, while valid, is shortsighted and only tells half of the story – it fails to address how lifting this ban will compromise national security. Although many believe American energy independence is on the horizon, the United States, as of 2012, is still only 80 percent energy independent, and produces only 11,000,000 of the 18,500,000 (~60 percent) barrels of oil it consumes domestically every day. The United States still has a ways to go before achieving energy independence and it is too soon to even consider lifting the ban.
Even if we assume that American energy independence will come sooner than we think, the call for lifting the export ban is shortsighted, as the near-term economic benefit does not outweigh the long-term security risk of returning to increased reliance on foreign sources of energy. Although lifting the ban would catalyze the American economy and its energy infrastructure, the US oil supply is finite. It is thus inevitable that we will reach a day when the domestic sources of oil mature and domestic consumption, once again, outpaces production. At this point, the United States, and the world will have to turn to renewable energy source. However, the shift to renewables is a long term, expensive project, the ban on oil exports is critical to allowing the United States to maintain its energy security during this transition.
The United States is at a crossroads. We can either commit to reducing long-term energy risks or take advantage of a much needed economic boost. Unfortunately, the dangers of energy dependence are too great to be overlooked and small, industry specific economic expansion is not worth the cost in terms of national security. By continuing the ban on oil exports despite the boom in domestic oil production, the United States has the opportunity, at last, to achieve sustained energy independence and limit the dangers of energy dependence.