Geology, engineering, economics and politics are all at stake. In the fuel-hungry 1970s, America banned crude-oil exports in an effort to stabilize domestic prices. The country\u2019s oil refineries are still configured to deal with the heavy, sour crude oil it used to import. Now, thanks to the shale revolution, American oil imports have plunged just as production has soared. Oil from shale is another kind of crude, light and sweet. It is not ideal for America\u2019s refineries, which must make costly tweaks to deal with it. But the ban means this oil can\u2019t be exported, either.<\/span><\/p>\n That archaic rule now keeps the price of America\u2019s domestically produced oil, signalled by the West Texas Intermediate (WTI) benchmark, at a hefty discount\u2014currently over $5 per barrel\u2014to the world price. That has become particularly painful since OPEC\u2019s decision in November to stop trying to curb production, which has sent prices tumbling. American oilmen are fuming: their potential export markets are being sacrificed, they argue, to the interests of America\u2019s petrochemical industry, which enjoys artificially cheap feedstock thanks to the ban.<\/span><\/p>\n Others would benefit too. \u00a0Free trade in crude would boost American output, investment, jobs, pay, profits and tax revenues\u2014and GDP by $86 billion. \u00a0With American crude bringing prices down, most likely the cost of fuel would fall a bit\u2014for Americans, and also for other consumers.<\/span><\/p>\n The administration\u2019s decision will test this theory. Mexico\u2019s national oil company, Pemex, has long wanted to send its heavy crude to America, and import the same number of barrels of lighter American oil. \u00a0The Commerce Department has now decided to treat Mexico as part of the domestic American market, as far as oil is concerned.<\/span><\/p>\n The extent of the exemption is still unclear. But this is not the first breach of the ban. The definition of what constitutes crude oil owes more to art (and bureaucratic fiat) than science. What is heavy crude? \u00a0What is light?<\/span><\/p>\n The ban undermines America\u2019s moral authority at the World Trade Organisation, where the administration has berated China, for example, for imposing export bans on scarce minerals. Higher American crude-oil exports would also hurt petrostates such as Russia and Iran.<\/span><\/p>\n The details will still be tricky. America\u2019s cossetted crude-oil consumers would be willing to see an end to artificially cheap raw materials in exchange for other concessions. These could include laxer environmental rules, or a change in an even more archaic law, the Jones Act, which bans foreign ships from carrying cargo between American ports. This law delights ship-owners and unions, but imposes a hefty cost on anyone wanting to send a tanker from, say, a refinery on the Gulf coast to a port in the north-east.<\/span><\/p>\n Such a wholesale solution to this elderly quirk in the world oil market may still be some time off. But by lowering trade barriers for Mexican oil, the Obama administration will make America richer, improve the functioning of the world oil market and highlight the potential benefits of still more dramatic reforms.\u00a0<\/span><\/p>\n The Rocky Road to Globalization The Economist reports: \u00a0When \u00a0the economics textbooks of the future are written, America\u2019s ban on crude-oil exports will be a fine example of the perverse effects of protectionism. Similarly, a new decision by Barack Obama\u2019s … Continue reading ![\"Oil](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/08\/Oil-Exports-and-Price.jpg\")
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