As students drive back to Austin for the start of school, they may notice that the price is only a little more than $2. This might be great for commuters, but the low price of crude oil, which gasoline is derived from, has led to the loss of 126,000 jobs nationwide, with Texas bearing the brunt of the job losses.
The price of crude oil in the US has recently been trading at less than $42 per barrel, a six-year low. The main reason for the low price is simple supply and demand. Countries around the world are producing record amounts of oil, but demand has not been growing as fast as supply due to the sluggish global economic growth. This leads to a surplus in oil supply and the current low price.
Crude oil is the unrefined product that is extracted from the earth. After refining, around 50% will become gasoline, with the rest becoming diesel fuel, jet fuel, kerosene, heating oil, and residual fuel oil. In 1975, President Gerald Ford signed the Energy Policy and Conservation Act, which banned crude oil exports. This was done in response to the 1973 Arab Oil Embargo, which caused global oil prices to skyrocket. The Act’s goal was to keep oil in the US and protect from price shock. Though not much can be done to change the supply and demand of oil, lifting the crude export ban would help many who lost their jobs in the energy sector get their jobs back, plus create more jobs than before.
The crude export ban was put into place in the 1970s, when America feared that it wouldn’t have enough oil for domestic use. It is an outdated policy from a time long ago. Many experts now believe that the world will never run out of oil, because of the constant stream of technological advances in discovering and producing oil.
Through technological advances such as hydraulic fracturing and horizontal drilling, the US is now one of the top oil producers in the world and has not produced this much oil since 1960. Critics of lifting the crude export ban point to the fact that the US still imports oil from other countries as a reason to not lift the ban. It may be true that the US still imports oil from other countries, largely from Canada and Mexico, but a slate of recent studies have shown that lifting the crude export ban will actually lower the price of gas as well as create more than a million jobs in the US.
The price of oil internationally is higher than the price in the US. Oil producers would be able to stem the tide of job losses if they were able to sell their crude oil for $49 internationally, instead of the $42 domestically.
“Allowing crude oil exports would increase world crude supplies and in turn, lower global crude and gasoline prices,” said Railroad Commissioner Craddick.
The Federal Energy Information Administration concluded that gasoline prices at the pump are more closely linked to global crude prices than the U.S. price. Therefore, lifting the ban will help create jobs because U.S. oil producers will be able to sell their oil for more internationally, which will then bring the international price of oil closer to the current U.S. price, resulting in lower price at the pump.
The Senate Committee on Energy and Natural Resources has approved a bill lifting the ban and the House plans on taking it up this fall. It is important for Congress and President Obama to lift the antiquated ban on crude oil export. If they fail to act, the US stands to lose more than 100,000 jobs. Lifting the ban would “increase U.S. GDP by as much as $135 billion/year, help reduce the national deficit by adding $1.3 trillion to government revenues over the 2016-2030 period, and reduce the U.S. import bill by $67 billion/ year,” said Craddick. American leaders should prioritize job growth and the welfare of the people. Lifting the crude export ban will do both by creating jobs and lowering the price of gasoline.
Hung is a second year law student from Brownsville.
Editor's Note: Hung is an intern at the Railroad Commission.