Whose Oil Is It?

by Don Boudreaux on December 23, 2015

in Energy, Seen and Unseen, Trade

Several days ago Boston Globe columnist Jeff Jacoby e-mailed me to ask my thoughts on the moral right of individuals to trade freely across political borders (as opposed to my thoughts on the economic consequences of the exercise of such a right).  Jeff asked because he was writing this column.  Unfortunately, when I got Jeff’s e-mail I was buried in the task of grading final exams, which caused me to delay by a day my response to him – a response that was too late given his deadline.  (If you read Jeff’s column, you’ll surely agree that nothing that I could have said to him would have improved his column one bit: it’s excellent as it stands.)  Pasted below, however, is the bulk of what I wrote to Jeff in response to his question.  (Link added)


The oil export ban has as a premise that American consumers have a moral claim on some of the fruits of oil producers in America.  The economic justification for the export ban is that it keeps lower the prices of oil and oil-intensive products in America.  Overlook the fact that the economics of this justification might well be mistaken; let’s assume that the intended price effect of the ban is the actual price effect of the ban.  The economic effect of the ban, therefore, is to transfer to American consumers some of the value of the efforts and risk-taking of American oil producers that would otherwise be captured by those producers.  Surely it’s a moral question if such a forced transfer is acceptable.

I like thinking of the matter in the following way.  Suppose that in your neighborhood there lives a physician.  And suppose that you and your neighbors form a mob and command the physician that he isn’t to sell his services outside of your neighborhood.  Suppose finally that this command does not discourage the physician from practicing medicine and that the effect of this export ban is indeed to lower the prices that you and your neighbors pay for medical care.  Would anyone think such a prohibition on the physician to be moral?

One more point.  The export ban is often justified with loose language – such as “It’s our oil!” or “The ban keeps our oil here in America for Americans.”

But what is this “our”?  The fact that some substance called petroleum happens to exist beneath the surface (and now also in the sands and rocks!) of the United States doesn’t mean that that petroleum is the collective property of all Americans.  To explore for and to extract petroleum is hugely costly.  Petroleum doesn’t just bubble up from the ground as it did for the fictional Jed Clampett.  Petroleum is made available only through the risk-taking, investments, and hard work of investors in oil companies.  So to support the ban because it keeps the price that these investors can charge lower is really to support a policy that treats the efforts and ingenuity and investable funds of oil-company investors as the collective property of Americans.



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