A lobbying blitz is under way to persuade the US Congress to repeal a ban on crude-oil exports. It’s led by oil companies and their usual champions, with intellectual support from an extraordinary union of usually non-oily public commentators, think tanks and editorial boards.

Surprising pro-repeal voices include the Aspen Institute, the Brookings Institution, the Council on Foreign Relations, New York Times writer Tom Friedman, Democratic Party financier Steven Rattner and the Washington Post Editorial Board.

On grounds of pure fairness, the pro-repeal crowd may be right—Americans have long gone around the world proselytizing about free markets and opening oil spigots; they should follow their own advice.

But the debate ought to pivot on that argument alone—fair trade—and dispense with exaggerated claims that have crept in, such as the contention that US oil is disadvantaged by the ban (paywall), and that repealing it will lower US gasoline prices and add jobs.

We discussed this subject back in January, when the current oil price plunge began to take hold: Since the economic trauma of the OPEC oil embargoes in the 1970s, the US has banned most crude oil exports (there are exceptions for Alaskan and some California crudes, exports to Canada, and the shipment abroad of refined products like gasoline and diesel).

One of the core reasons is optics: it doesn’t look good to be shipping domestic oil abroad when OPEC has had a decidedly anti-market stranglehold on the global supply.

The pro-repeal crowd argues that those days are long gone, that OPEC no longer has fangs, the world is awash in crude oil, and the US itself is back at the forefront of production. By wallowing in long-ago fears, they say, the US is squandering the full value of its shale-oil fortune, allowing foreigners to get the upside.

It is true that shale oil and gas have had a potent impact since bursting onto the market in the late 2000s. By driving down prices, they have disrupted the lives of petro-dictators, and reduced car fueling bills. There has been at least a modest bump in US manufacturing, according to one report.

Yet, some of shale’s biggest promise has fallen short. Specifically, shale hasn’t produced a big net increase in US jobs, which was one of the primary benefits held out by shale boosters, who said millions of jobs would be created.

From the advent of the boom in 2007 through its peak last December, industry employment surged to 201,000 workers, according to the US Bureau of Labor Statistics. But US companies have cut more than 78,000 oil-related jobs in the first seven months of this year, appearing to make the job situation more or less a wash, according to Challenger Gray, a consulting firm. Employment is back down to 193,000, the BLS says. This chart shows how oil production has continued to surge, even as the number of jobs has plunged.

In addition, cold water has been poured on the renaissance story—plastics companies, which rely on natural gas, continue to hire, according to the American Chemical Council, but everywhere else is a bloodbath.

The main reason for the disconnect is that, in their breathtaking descriptions of the shale-driven future, none of the prognosticators seems to have calculated the potential impact on oil prices if their supply forecasts were right. That, if shale oil supplies rose as they projected, all things being equal, the world would turn out as it currently is—awash in crude oil, prices down by half, with no recovery perhaps for years to come.

Now, the same crowd is forecasting great things again, if only the export ban is repealed. IHS, a research firm that has released a torrent of industry-sponsored, pro-shale and pro-export studies over the past three years, said in a March report that US jobs will rise between 293,000 and 439,000 if the ban is repealed. Its rationale is that the companies will drill more, thus requiring more workers. In one scenario, IHS envisions the US producing 11.4 million barrels a day, about 2 million more than it does currently.

IHS declined to comment for this post. But the forecast is almost certainly wrong. As noted above, US oil production has remained at a level not seen since the 1970s despite the job cutbacks and a plunge in the number of rigs drilling, thanks to greater productivity and a 30% reduction in expenses.

Given their success producing more for less, US companies, if they drill for and sell more oil, will drive prices down further, thus benefitting consumers with lower gasoline prices. But they won’t be rehiring tens of thousands of workers.

Source: qz.com

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