Oil prices continue slide, fueling calls for US crude exports
Surging US oil production and plummeting oil prices has ignited a debate over a decades-old ban on US crude exports. It's an issue that will get increasing attention in a GOP-dominated Senate next year.
For some 40 years the US has prohibited the export of most crude oil, requiring producers to refine petroleum products like gasoline or diesel before shipping them overseas.
But times have changed since the shortage-era policy came about. The US is producing more oil than any time since the 1980s, and oil producers are eager to sell US crude abroad.
The sudden collapse of oil prices to five-year lows only accelerates a push to peel back the exports ban, as producers seek out more lucrative markets. But it remains a politically sensitive topic, with all sorts of potential far-flung effects on the economy and the environment.
Republicans aren’t waiting till next year to consider revising the ban. Tuesday Rep. Joe Barton (R) of Texas introduced legislation lifting the ban, ahead of a Thursday energy and power subcommittee hearing on the longstanding policy – an initial move towards potentially shipping more US crude to foreign markets.
“The U.S. has long been committed to free trade and open markets; it’s time we practice what we preach when it comes to energy,” Rep. Barton said in a statement Tuesday. Barton’s bill would "remove all restrictions on the export of crude oil, which will provide domestic economic benefits, enhanced energy security, and flexibility in foreign diplomacy."
Most GOP lawmakers have remained quiet. Lifting the ban may cause backlash among Americans who say exporting US oil wealth could drive up gasoline prices and further expose the US to turbulent global markets.
“The complete dependence on this single fuel exposes American families, the economy, and our energy security to sudden price volatility or supply disruptions, even though we are producing the highest amount of oil in a generation,” the Center for American Progress, a liberal think tank, wrote earlier this year in a report making the case for keeping US oil at home while developing other energy sources. “We must invest in alternative, nonpetroleum transportation fuels—including electric vehicles, advanced clean biofuels, and public transit—to reduce our exposure to supply disruptions or price spikes.”
Gasoline prices are at five-year lows, and crude prices have plummeted 40 percent since peaking in June. A recent report from the US Energy Information Administration suggests exports could actually put downward pressure on domestic prices by making markets more efficient and increasing global supply. Meanwhile, collapsing oil prices have stoked fears that a low-price oil economy could stall the US shale boom, since drillers generally need higher prices to justify production from shale.
Industry says that oil at $65 a barrel is all the more reason to ship US crude abroad, since oil could sell at higher prices in foreign markets. The current policy threatens to slow the US shale boom, says Jack Gerard, CEO of the American Petroleum Institute, a Washington-based industry group.
“The worst thing for us to do is put hurdles in the path of the American energy renaissance,” Mr. Gerard said on a call with reporters last week. “Now is the time for the US to look for additional markets for our products.”
Easing the oil exports ban “would probably increase domestic production but have little effect on prices,” according to a report released Tuesday by the Congressional Budget Office. “That increase in production would probably make GDP and federal revenues slightly higher than they would be under current export policies.”
Environmentalists object to crude exports, concerned that lifting the ban would encourage more fracking and oil drilling in the US. A recent Government Accountability Office report found that allowing oil exports could lower consumer fuel prices, but increased production “may pose risks to the quality and quantity of surface groundwater sources; increase greenhouse gas and other emissions; and increase the risk of spills from crude oil transportation.”
Action is unlikely on an exports bill this year, but Rep. Barton will likely re-introduce his exports legislation next year when a GOP-led Senate is more likely to take it up.
Sen. Lisa Murkowski (R) of Alaska is a vocal proponent of oil exports on the Senate side of Capitol Hill, but has yet to introduce legislation lifting the decades-old ban. Ms. Murkowski is positioned to lead the Senate Energy and Natural Resources Committee next year.
Even vocally pro-export Murkowski was treading lightly when asked if she supports the bill Barton introduced in the House.
"I'm not going to make a judgment on that at this point in time," Murkowski told reporters in the Capitol earlier this week, according to Environment and Energy Publishing. "But I do think the conversation is teed up for 2015, which is exciting."
It’s unclear how the Obama administration would react to GOP legislation lifting the ban.
“The issue of crude oil exports is under consideration," Energy Secretary Ernest Moniz said in May. “A driver for this consideration is that the nature of the oil we're producing may not be well matched to our current refinery capacity.”
However, Mr. Moniz has also noted on various occasions that, despite the boom in domestic production, the US remains “a very large importer of oil.”