What happens if we scrap the US oil exports ban?

The push to end the decades-old oil export ban is heating up in the Senate, but there's opposition from green groups who oppose drilling, and from legislators worried lifting the ban could be blamed for higher gasoline prices.

The longstanding ban on most US crude oil exports could be on the way out.

Senate Energy Committee Chair Lisa Murkowski (R) of Alaska and Sen. Heidi Heitkamp (D) of North Dakota introduced a bill Wednesday to lift the decades-old ban – a quest that’s become a cause célèbre among energy-state legislators from Texas to North Dakota.

Efforts to allow for oil exports have picked up steam in recent months due to low oil prices, and the crude exports push could creep into debates over a proposed trans-Pacific trade deal or broader energy legislation.

"I am going to be looking for every opportunity we might have to advance it," Sen. Murkowski told reporters at a press conference last week, adding that the bill she’s introducing will be a "great talking opportunity at a minimum."

Rep. Joe Barton (R) of Texas has introduced bills similar to Murkowski’s in the House, and has said momentum is building for action in Congress.

Opponents of the 1975 oil exports ban say it’s a relic of a different era, created in response to the Arab oil embargo and fears of US energy scarcity. But the US energy picture is dramatically different today: The US, Saudi Arabia, and Russia are now competing head-to-head to be the world’s No. 1 producer. Ending the ban could bolster US production, advocates say, and help US producers left reeling by low oil prices.  

“The 1970s-era ban on exporting American crude oil is as outdated as the typewriters on which the policy was written," Sen. Heitkamp, the bill's only Democratic co-sponsor, said in a statement Wednesday. "It’s past time for an upgrade.”

Scrapping the ban would also resolve questions about what, precisely, is banned – and why. Some in the industry say the rule was muddied last year when the Commerce Department allowed for exports of condensates, a lightly-processed product previously thought to be banned.

 

For its part, the Obama administration appears to be in no rush to open the spigot on oil exports, Reuters reports, because the US still imports large quantities of oil. Though petroleum imports last year were the lowest since 1985, the US still imported 27 percent of its crude oil and petroleum products in 2014, according to the US Energy Information Administration.

But perhaps the biggest obstacle to lifting the ban is an age-old concern that doing so would raise domestic gasoline prices, or harm US energy independence. Heitkamp said last week that legislators are worried that if gas prices tick up they’ll pay a political price for lifting the ban.

"If you can guarantee that gasoline prices will stay stable over a long period of time, people would do this tomorrow," Heitkamp said, adding that most research suggests US oil exports wouldn’t raise domestic gas prices. In fact, a recent report from EIA indicates that US oil exports could actually push down domestic prices by boosting both global supply and market efficiency.

But others, like Sen. Ed Markey (D) of Massachusetts, say the ban shouldn’t be lifted without a broad discussion on US energy security. Environmentalists are concerned that lifting the ban would encourage even more US oil extraction, threatening local environments and increasing greenhouse gas emissions.

"A repeal would increase fracking, putting communities at even greater risk of air and water pollution and earthquakes," Marcie Keever, a program director at environmental group Friends of the Earth, said in a statement Wednesday. "Keeping the crude export ban in place would help to keep this dirty, dangerous, climate-disrupting fossil fuel in the ground where it belongs."

An exports bill could gain Democratic support this summer during debate over a larger energy bill, Heitkamp says, perhaps if Republicans agree to extend wind tax credits.

Still, experts wonder what effect lifting the US ban on crude exports would have on the notoriously unpredictable global oil market. Weak growth in the developing world, an OPEC meeting coming in June, and the potential of Iran’s oil re-entering the global market could all complicate oil supply and demand.

“If the ban is lifted tomorrow and Asia remains down in the dumps, the price could further depress,” says Deborah Gordon, director of the energy and climate program at the Carnegie Endowment for International Peace, a Washington-based think tank. “Given no global growth, our oil added to the global barrel isn’t a positive signal. I think it would keep oil prices low even longer – at least until global growth turns up.”

But with prices low and US demand for light shale oil limited, the oil industry has trained its eyes on foreign markets.

The slump in the price of oil has challenged the economics of the domestic industry, and shale drillers in North Dakota and Texas have felt the pinch of low prices most acutely. The expensive techniques that shale producers use to tap hard-to-reach oil created the US oil and gas boom over the last several years, but those methods require high oil prices to turn a profit.

"Today there are few public policy changes that will bring as much economic value to our domestic economy," Jack Gerard, president of the American Petroleum Institute, an oil industry group, said on a call with reporters last week.

Oil-state legislators like Sen. Ted Cruz (R) of Texas and Murkowski had mulled the possibility of adding oil exports language onto other bills over the last several months. In January, Sen. Cruz considered attaching oil exports language to a bill approving the Keystone XL pipeline. Last week, Murkowski floated the idea of including it on the bill giving Congress power to review Obama’s nuclear deal with Iran.

"Here we are thinking about lifting the sanctions on Iran and letting them export, and yet here we have sanctions in America that we can't export our oil,” Harold Hamm, CEO of Continental Resources, an oil company heavily involved in shale drilling, said last month.

In both instances, the senators backed off over concerns that an oil exports debate could derail the larger piece of legislation. But the fact that talk of lifting the ban has popped up more and more frequently underscores how much the industry and oil-state members of Congress are itching to ship US crude to foreign markets.

Many in the oil industry believe higher prices could be found if US crude could hit global markets, though other markets may not be much better equipped to handle light US oil.

“A lot of refiners globally had be planning for heavier oil,” Ms. Gordon says in a telephone interview Monday, from places like Venezuela and Canada. “It’s not exactly clear where this [light] oil is rushing for right now.”