Thanks to punishing international sanctions, Iran's economy is suffering. In an effort to stop that country's nuclear weapons program, the U.S.-led effort has restricted Iran's oil exports.
But the Obama administration just made a deal with Iran that could lift those sanctions. That raises a question:
If unfettered commerce in oil is fine for Iran, then why not for America?
For 40 years, the federal government has prohibited the American energy sector from exporting more than a tiny fraction of domestically produced crude. Fortunately, a bipartisan group of legislators is pushing to end this harmful restriction. They shouldn't waste any time. Selling American crude on the international market would boost domestic production while spurring economic growth at home and around the world.
When President Gerald Ford signed the ban into law, the nation was still reeling from the fuel shortages of the 1973-74 Arab oil embargo. By keeping American crude off the international market, the ban was intended to prevent a future crisis. But as those of us who remember the gasoline shortages of the late 1970s can attest, it didn't work.
Four decades later, the policy makes even less sense. Thanks to the so-called shale revolution, the United States has been the world's leading producer of oil and natural gas for three years running.
Against this backdrop, the fears of oil shortages that motivated the export ban seem quaint. But this '70s-era policy isn't merely anachronistic. It's holding back both our energy sector and the economy.
For starters, restricting oil exports weakens incentives to invest in exploration and production. With the world price of crude having fallen from roughly $107 a barrel to around $53 a barrel today, the domestic market is awash in oil. According to a new analysis by the financial services firm Raymond James & Associates, "U.S. crude production peaked in March and has been falling since that time." Allowing export sales would let the global market absorb greater U.S. production and thus encourage crude producers throughout America to keep producing at peak capacity.
Further, U.S. refineries can only process a limited amount of heavy crude, creating a production bottleneck. Again, foreign sales would relieve that pressure.
If legislators were to lift the oil-export ban, crude production would surge. Energy firms would work to supply an oil-hungry global market. Foreign refineries, meanwhile, would add new efficiency to the domestic energy sector.
Investment in energy development would soar even more, generating new economic activity throughout the United States.
The consulting firm IHS estimates that a repeal of the ban would create an average of nearly 400,000 new jobs annually by 2030. Gross domestic product, meanwhile, would rise by $134 billion in 2018 alone.
Americans wouldn't be the only ones to benefit from a repeal of the ban. An American-led increase in the global supply of crude would drive down global energy prices, spurring economic growth in the process.
Consequently, it's encouraging that a group of 13 members of Congress from both parties - led by Sens. Lisa Murkowski (R., Alaska) and Heidi Heitkamp (D., N.D.) - are working for full repeal.
Nevertheless, many pundits continue to deploy faulty economic logic in support of the ban. Making our oil resources available abroad, one argument goes, would raise energy costs here at home.
But the opposite is true. As the supply of crude and the capacity to refine it increase, the price of everything from gasoline to heating oil and diesel will fall significantly. A report from ICS International estimates that U.S. consumers would save $5.8 billion by 2035 thanks to falling prices if the export ban ends.
This prediction isn't surprising. As Adam Smith explained in 1776, "he prohibition of exportation limits the improvement and cultivation of the country to what the supply of its own inhabitants requires. The freedom of exportation enables it to extend cultivation for the supply of foreign nations."
Nearly 240 years later, our federal government is still needlessly depriving the global economy - including Americans - of the prosperity and opportunity that flow from unfettered trade in oil. How much longer do we have to wait?