The United States has banned crude oil exports since 1975 — two years after the Arab oil embargo sent gasoline pricings soaring. There are exceptions to the nearly 40-year-old export ban but very little crude oil gets exported every year. Under current law, oil producers have to send their crude to a refinery to be processed into fuel before it can be shipped overseas.
The gasoline shortages of the 1970s were long ago but the policies of that era live on. Recently, many people in Washington and the industry are talking about rescinding the export ban. Lifting the U.S. crude export ban is a highly charged political issue and such a push is meeting resistance from energy consumers worried exporting crude could lead to higher U.S. fuel prices.
Why should the ban be lifted?
In a recent article in “The Wall Street Journal,” ExxonMobil calls for the United States to lift restrictions on exporting domestic oil. The company’s public sup-port for crude exports comes as it forecasts decades of abundant supplies of petroleum in the United States and elsewhere as well as increasing global demand for oil.
“We are not dealing with an era of scarcity, we are dealing with a situation of abundance,” Ken Cohen, ExxonMobil’s vice president of public and government affairs, told the newspaper. “We need to rethink the regulatory scheme and the statutory scheme on the books.”
According to “The Wall Street Journal,” ExxonMobil has long held the same trade rules should apply to oil and gas as other products made in the United States, and has said North America was pumping enough oil and gas to become an exporter. But now the world’s largest investor-owned energy company is explicitly calling for an end to America’s effective ban on most crude exports. In the past year, Royal Dutch Shell and ConocoPhillips have also called for the United States to permit crude exports.
In addition, many public officials have called for the federal government to lift the ban including U.S. Chamber of Commerce President Tom Donohue and API President Jack Gerard. Sen. Lisa Murkowski (R-Alaska) recently called on the Obama Administration and Congress to loosen restrictions on the crude oil exports in order to boost domestic production.
“I have spent the past several months thinking about this export issue,” Murkowski said. “I am calling for ending the prohibition on crude oil and condensate exports. The current system is inefficient and may lead to supply disruptions that we can ill afford. Lifting the ban will send a strong signal to energy markets that as a nation we are serious about our emerging role as a major hydrocarbon producer.
“I believe the administration retains enough statutory authority to lift the ban on its own. Although the president has the authority to declare it in the national interest to lift the ban, another path is for the Department of Commerce to approve an application for export of crude oil or condensate under a provision in the law permitting the application if it can be demonstrated that those fuels ‘cannot reason-ably be marketed’ here in the United States. A mismatch then in our nation’s refining capacity has already emerged and common sense suggests the mismatch should meet these qualifications.”
Murkowski said if the administration is unwilling to act on its own, or if that statutory authority needs further modification, she is prepared to introduce legislation to modernize the law.
“Lifting the prohibition on crude oil exports will serve to increase domestic oil production, and the entry of this oil onto global markets will put downward pressure on international prices,” she said. “All things equal, this combination will help the American consumer. I want to be abundantly clear — I think the status quo is not beneficial to the American people. We must act before the crude oil export ban causes problems in U.S. oil production, which will raise prices and hurt American jobs.”
What are the arguments against lifting the ban?
As calls have grown to lift the ban on American crude oil exports, others have opposed lifting it. Sens. Edward J. Markey (D-Mass.) and Robert Menendez (D-N.J.) recently laid out the legal case against lifting the ban in a letter sent to President Obama. In the letter, the senators note allowing crude oil exports would increase U.S. reliance on foreign oil.
“Existing law regarding crude oil exports is very clear,” write the senators to the president. “And while we are rapidly reducing our reliance on foreign oil under your leadership, the job is not yet complete. We remain just as reliant on foreign sources of oil today as we were when Congress and President Ford acted in 1975 to ensure the oil produced in America would stay in America. Now is not the time to reverse these policies that protect American consumers and America’s economic and national security. We urge you to reject calls to authorize any new categories of exports of U.S. crude oil absent Congressional action.”
Valero Energy, an independent refiner, has opposed lifting the ban because the company is taking advantage of cheaper prices for domestic crudes. The Center for American Progress also recently released an analysis that supports retention of the ban.
“Thanks to innovative drilling techniques and President Obama’s modern fuel-economy standards, the United States is producing more oil and using less of it,” said Daniel J. Weiss, senior fellow and director of Climate Strategy at the Center for American Progress. “Selling crude oil at a higher price on the world market would pad the bank accounts of oil companies, but it could also raise gasoline prices at home and increase our imports. To protect the pocketbooks of families and businesses and maintain our energy security, we should keep American oil here at home.”
How likely is it Congress will revisit the ban?
Today, revisiting the subject of the oil export ban is getting more and more support in Congress. U.S. Secretary of Energy Ernest Moniz said he’d even be willing to revisit the ban.
“There are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s,” Moniz said.
AFPM President Charles Drevna said any push to lift the ban should be accompanied by several other measures such as changing the Jones Act, requiring vessels transporting oil between U.S. ports be made in America, and approval of the Keystone XL oil pipeline.
“We’re not opposed to elimination of the ban but there are a whole lot of ancillary and tangential things that go along with it,” he said.
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