US politicians have long been nervous about ending the export ban, worried they will be left open to claims that selling more oil overseas would push up the price of fuel for motorists at home.

The theory was misguided. A bigger consumer market for US oil will encourage American investment and production, creating jobs and economic activity.

BHP Billiton chief executive Andrew Mackenzie has been making similar arguments in the corridors of power in Washington, where he has pushed strongly for opening up energy trade over the past two years. BHP controls energy assets offshore in the Gulf of Mexico and onshore in Texas, Louisiana and Arkansas. It will be a mild beneficiary of the policy change, particularly as oil prices eventually recover.

The crude oil price is depressed below $US40 a barrel so the immediate economic benefits to the industry and economy from permitting American exports are likely to be limited.

Investment cuts

Producers are cutting back on capital investment to cope with a near seven-year low in prices.

But over the medium term, there is likely to be economic benefits and international security positives from the liberalisation.

Providing Asia and Europe with an alternative to Russian oil and gas will make countries less beholden to Vladimir Putin. It will become easier for Europe to agree to harsher sanctions against Russia for any indiscretions such as its incursion into eastern Ukraine.


Free markets and technology will help to curb a dangerous regime. It is the perfect example of how capitalism should work.

Moreover, the potential for US oil to be shipped overseas, beyond limited existing agreements with Canada and Mexico, will likely reduce volatility in the world oil price.

If there are supply disruptions in the Middle East or North Africa, American oil will be able to fill the gap and dampen price spikes.

The world is producing about 2 per cent more oil than is in demand. It would not take a major breakout of hostilities in various flashpoints around the world for the excess production to dry up.

Washington's possible turning point

Politically, repealing the oil export ban may prove to be a turning point for a gridlocked Washington.

The new Republican House Speaker, Paul Ryan, successfully brokered a deal with Democrats to push through the measure as part of a broader $US1.1 trillion budget package. It ends the prospect of another government shutdown and signals that Ryan may be the person to restore at least some functionality to Congress in the final 12 months of the Obama administration. It's too soon to call an end to the chaos in Washington, but Ryan has provided genuine hope.

Many wondered why he agreed in October to take on the tough job, given the Tea Party rebellion in Republican ranks took down his predecessor John Boehner.


Yet if Ryan continues to notch up wins like eliminating the oil export prohibition, the 45-year old will greatly increase his chances of becoming a future Republican presidential candidate in 2020 or 2024. He was Mitt Romney's vice -presidential running mate in 2012 against President Barack Obama.

While Ryan's more strident views on gun rights and social conservatism will always be difficult for Australians to understand, his pro-free trade ideology and more muscular foreign policy approach will not be unwelcome to many in Canberra.

Ryan will be pivotal in trying to shepherd the Trans-Pacific Partnership through Congress next year, a passage that is looking fraught with danger.

As BHP's Mackenzie said in Washington in September, ending the oil export ban and embracing free markets would demonstrate the "nation's ongoing commitment to economic freedom and the promotion of global growth".

At a time when the global economy is slowing and anti-trade protectionists are noisy, it is precisely the kind of world leadership the world needs more of from America, to show how markets and technology are powerful forces for good.

John Kehoe is US Correspondent for The Australian Financial Review in Washington.