Is the four-decade-old ban on U.S. exports of crude oil a useless relic or a valuable safeguard for American consumers? Or is the ban so full of holes that it doesn’t matter anymore?
A House bill that would end the ban is set to pass the Energy and Commerce Committee on Wednesday, and House Majority Leader Kevin McCarthy R-Calif., said this week that the legislation could come to the floor soon.
“If there was ever a time to lift the oil export ban, it’s now,” he said in remarks prepared for delivery to a civic group in Houston. He added that “as President Obama prepares to lift sanctions on Iran, including Iranian oil, it is unfathomable to think American crude wouldn’t have the same opportunity on the global market.”
White House spokesman Josh Earnest on Tuesday brushed aside McCarthy’s comments, saying “the priorities of his party in Congress [are] to cozy up to oil interests.” Earnest said “we wouldn’t support legislation like the one that’s been put forward by Republicans.”
That hasn’t stopped oil producers from beating the oil export drum louder and louder in recent years. Their sense of urgency has grown as U.S. shale oil production has soared and put downward pressure on the price of West Texas Intermediate crude, the U.S. benchmark price.
Leading economists, including former Treasury secretary and former Obama economic policy director Lawrence Summers, say that free trade in oil will promote efficiency as it does in other areas. At a Brookings Institution event a year ago, Summers also said, “We have a long history of believing that export restrictions are not an appropriate policy tool.”
But lifting the oil export ban could hurt certain oil refiners by raising their raw material costs, and it could hurt some consumers by raising prices at the gasoline pump — albeit slightly, if at all. The Energy Information Administration said gasoline prices would remain “either unchanged or slightly reduced.” (While domestic crude prices would initially rise, international crude prices — including those for U.S. imports — would fall.)
Many lawmakers are worried about a consumer backlash.
“No one knows what they pay for milk anymore,” Sen. Edward Markey, D-Mass., said at a National Journal panel sponsored by the American Petroleum Institute. “The only price they know is the price of gasoline because they’re staring at it for two minutes as they fill their tanks up.”
The crude oil export ban carries political symbolism beyond its economic importance. In the wake of the 1973 Arab oil embargo, Congress adopted the Energy Policy and Conservation Act of 1975 and the Export Administration Act of 1979 making it illegal to export U.S. crude without a special license.
The exceptions include oil produced from Alaska’s Cook Inlet near Anchorage, oil exported to Canada and small amounts of heavy, difficult-to-refine crude produced in California. The Obama administration has also allowed some crude oil swaps with Mexico.
Through the first five months of 2015, crude oil exports averaged 491,000 barrels a day, according a newly published report by the Energy Information Administration.
Scott Sheffield, chief executive of shale oil producer Pioneer Resources, expects that lifting the export ban could end up allowing some U.S. light crude to go to Europe to displace Russian oil, which would go to China, while the United States would increase its imports of Canadian oil sands and Saudi heavier crude oil.
There have been no restrictions on the export of refined petroleum products. Since 2011, the United States, with some of the world’s most advanced refineries, has been a substantial net exporter.
Some political analysts have speculated that the administration might use the ban as a bargaining chip in budget negotiations and that there is no better time to lift the export ban than when gasoline prices are low. The national average price for regular gasoline is currently $2.37 a gallon.
Markey said that lifting the ban would undercut the administration’s influence at the Paris climate talks in December, where Obama hopes to seal an international deal to lower greenhouse gases. And Markey said that the oil industry was pushing for lifting the ban while also pushing to cut tax incentives for renewable energy.
“More and more it looks not like an all-of-the-above strategy but an oil-above-all strategy,” he said.
The Eurasia Group, a consulting firm, said that Democrats and the administration would oppose lifting the ban unless Republicans were willing to agree to long-lasting extensions of tax incentives for renewables. And White House spokesman Earnest twice mentioned the need to extend renewable incentives when asked about the export ban.
In the Senate, Majority Leader Mitch McConnell, R-Ky., said he would welcome the ban as part of budget talks. The Senate Energy and Natural Resources Committee sent a bill to the floor in July, and the Banking Committee also is considering a measure.
Senate efforts to end the ban have some bipartisan support, from Heidi Heitkamp, D-N.D., and Joe Manchin, D-W.Va. But more Democrats would need to join them to overcome a filibuster.
Heitkamp said Tuesday that she believed Democrats can be persuaded to support ending the ban.
“At the end of day, there’s two camps,” she said. “The first camp is, ‘What do we get for it?’ And the second camp is, ‘I’m concerned that if oil prices go up, I’ll get blamed.’ I think now it’s about how do we fashion a package that responds to some of my [colleagues’] energy concerns.”
One of those is Sen. Angus King, I-Maine, who opposed ending the ban in the July Energy Committee vote but says he could support it in a package that included, for instance, extensions of tax credits for renewable energy investments or caps on natural gas exports.
“I’m willing to consider this, but I need to see something coming on the other side,” he said.