Imagine that it’s your day of the month to purchase gasoline because of your license plate number. You arrive at the gas station and there is a long line of cars waiting to fill up. You’ve avoided getting gas for days because of the long lines but now the gas gauge is reading empty.
Though this may seem like fiction, this was a reality for many in south Texas and nationwide during the mid-1970s.
Faced with soaring oil and gasoline prices, President Richard Nixon attempted to reduce the economic burdens by controlling petroleum prices. Instead, prices were held too low leading to less production and overconsumption, resulting in many gas stations running out of gas.
Fortunately, these consequences eventually led to ending these price controls.
Letting free markets work instead would have been the better way. Even if petroleum prices would have been initially higher, market forces would have generated more production and less consumption at a higher price from less oil overseas without devising absurd rationing schemes.
However, a market-distorting 1970’s restriction remains: a ban on oil exports.
Since some refineries must use a heavier crude oil shipped from the North Sea, and not the light sweet crude oil domestically produced, our domestically-produced oil has built up record inventories from hydraulic fracturing and the shale revolution.
If domestic oil could be exported to other countries who could refine it into gasoline or other products, this could help generate more oil production in Texas, lower global oil prices, and stabilize gasoline prices.
Texans have had to pay higher gasoline prices and incur much damage from this antiquated 40-year ban that should end immediately, which a bill in Congress would do but looks dead on arrival at the White House.
Texas’ latest oil production level in June 2015 was up 2.4 million barrels per day to 3.5 million since June 2007. That’s a whopping 227 percent increase in only eight years representing 57 percent of the total 4.2 million barrels per day increase in the United States.
In that eight-year period, Texas’ share of U.S. oil production increased from 21 to 37 percent — the highest on record since 1981, when data was first tracked.
Though the plunge in oil prices since last summer led to less than half the number of active oil rigs in Texas, oil production continues to pump near the record level. In March, 3.6 million barrels per day were pumped.
The increased oil production in Texas despite lower oil prices helped generate $2.9 billion in oil-related state tax revenue in fiscal year 2015, which is 4.2 percent above the projected estimate, contributing to the Texas Comptroller’s budget revenue estimate to be within 0.2 percent of the actual.
Ending the oil export ban could increase oil production and increase exports from Texas, boosting the state’s economy that has been America’s jobs engine. For example, Texas has created more than half of all civilian jobs created nationwide since the last recession started in December 2007.
The Texas miracle of robust job creation benefitted from expanded oil production. But the declining share of the mining industry, which is dominated by oil and natural gas activity, shows that though Texas benefits from more oil production, it has become more resilient, yet not immune, to low oil prices.
Though many continue to do well, some Texans are starting to feel the strains of low oil prices and global economic uncertainty as civilian employment has declined each month since March. To help counter a more substantial downturn by boosting economic activity and potentially lowering gasoline prices leaving more money in families’ pockets, let’s hope the White House reconsiders when they receive the bill to lift the failed oil export ban.
On Thursday, a bill by Sen. Heidi Heitkamp, D-N.D., to lift the 40-year-old ban passed in the U.S. Senate Banking Committee by a vote of 13-9. However, there was a controversial amendment added by Sen. Pat Toomey, R-Pa., that would make Iran pay U.S. victims of Iranian backed terrorism, which could cloud the bill’s future. The White House will likely veto the bill anyway. This is too bad given the potential benefits to Texans and the nation that lifting this ban could generate.