Moniz: It might be time to look at lifting that antiquated crude-export ban

posted at 3:31 pm on December 13, 2013 by Erika Johnsen

The United States’ shale boom has been responsible for more trickle-down economic benefits than I can even begin to count, but the latest and perhaps greatest policy side-effect of the thriving oil-and-gas revolution is perhaps lawmakers’ newfound willingness to reconsider the crude-oil export restrictions currently hindering the industry and wider American economy from even better successes. Our domestic energy sector is awash in even more energy resources than we know what to do with, but our longstanding and highly selective lack of support for the robust free-trade policies that would better allow us to take advantage of the boom are still holding us back — and the time might perhaps to be ripe to put an end to those restrictions’ unfortunate staying power. Via The Hill:

Sen. Lisa Murkowski (R-Alaska) wants to lead the debate on whether the U.S. should break with its decades-old ban on crude oil exports.

And she wants to start it soon — by mid-January, to be exact.

Murkowski plans to release a white paper on the pros and cons of opening the country’s export policy on crude, one of her top aides told The Hill.

“Sen. Murkowski believes the debate on energy exports is coming sooner rather than later,” said Robert Dillon, an aide to the senator, who sits on the chamber’s Energy and Natural Resources Committee.

“The debate has been centered on natural gas, and she wants to switch it to oil.”

The fight over increasing the allowed level of natural-gas exports has indeed been the hot energy-related debate over the past year or so, with certain Democrats acting particularly protective of the special interests that would like to forcibly keep natural gas prices as low as possible (despite President Obama’s own personal goal of increasing U.S. exports as a direct means to strengthen the economy! …I feel like I’m taking crazy pills), but the debate over whether or not to free up the oil market is likely to be equally if not even more contentious with all kinds of intellectually cheap notions like “energy independence” as well as specially-interested rent-seeking coming in from all partisan sides.

Fortunately, there’s a standing possibility that the Obama administration might be able to get on board with the idea:

US Energy Secretary Ernest Moniz Thursday said with the US awash in domestically produced oil, it may be time to review the country’s ban on crude exports. …

As for crude exports, Moniz noted that any decision on whether to relax the ban is up to the Department of Commerce, not DOE, but he said his agency would be ready to provide any technical analysis if called upon. The US bans exports of crude, except for a small amount to Canada.

“Those restrictions on exports were borne, as was the Department of Energy and the Strategic Petroleum Reserve, on oil disruptions,” Moniz said. “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.”

One of the biggest kickers in this upcoming debate is going to be whether or not changing the current policy might lead to rising gasoline policies — but even an increase in gas prices isn’t necessarily a sure thing, as Neil Hume explains at the Financial Times (h/t to Scott Lincicome):

The US crude oil market has decoupled from the global market because severe restrictions on exports mean that fast-growing US crude production is effectively captive to the domestic market, putting downward pressure on prices. …

“Gasoline, as a globally traded commodity, trades against Brent. The crude export ban serves to lower WTI, leaving refiners to capture the spread between US crudes and global gasoline prices,” says analyst Seth Kleinman. “If lower gasoline prices for the US consumer are a desired aim, the US should be exporting crude, and lowering Brent and hence global gasoline prices in the process.”

Now, the idea of relaxing the draconian rules on US crude exports is usually dismissed by industry executives. They ask what American president would push for a policy that could in the event of geopolitical instability in the Middle East, for example, lead to higher prices at the petrol pump.

But it could also do the reverse.

“If liberalised US crude exports narrowed the spread and knocked $5 a barrel off Brent in the process, then ceteris paribus US politicians could expect to see US gasoline prices fall by 12 cents a gallon,” says Mr Kleinman.”

The global oil market is a complex beast, and it’s tough to know precisely what will happen until we allow it to, but the biggest point to remember here is that either way, free trade is not a zero-sum game. Restrictions on what we can and cannot export or import are nothing more than artificial market manipulations that selectively benefit a particular interest group at the direct expense of everyone else; even if gasoline prices did increase as a result of increased exports, American producers and subsequently the larger domestic economy would be among those reaping the benefits of that expanded global market. It really is that simple.


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canopfor on December 13, 2013 at 3:35 PM

Moniz: It might be time to look at lifting that antiquated crude-export ban

Na. Lets talk about Amnesty, raising the minimum wage, and getting drivers licences for plants, maybe if there is time we can work on that currency for cats and dogs too.

Nothing that would help the US basically.

Gatsu on December 13, 2013 at 3:36 PM

it may be time to review the country’s ban on crude exports.

Wait, we have a what?

I need to go lie down for a while. The stupidity is overwhelming.

rbj on December 13, 2013 at 3:36 PM

1m
Live video: Local coverage of shooting at Colorado high school – @NBCNews
see original on nbcnews.com
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http://www.nbcnews.com/video/nbcnews.com/53823304

canopfor on December 13, 2013 at 3:37 PM

Imagine Saudi Arabia had a crude oil export ban. That situation is similar, though not on the same scale. End the export ban!

anotherJoe on December 13, 2013 at 3:38 PM

Export crude? Force lower prices?

Saudis aint gonna like that. Remember 9/11.

BL@KBIRD on December 13, 2013 at 3:39 PM

The eco-Marxists will fight it every step of the way.

Charlemagne on December 13, 2013 at 3:40 PM

The global oil market is a complex beast, and it’s tough to know precisely what will happen until we allow it to, but the biggest point to remember here is that either way, free trade is not a zero-sum game. Restrictions on what we can and cannot export or import are nothing more than artificial market manipulations that selectively benefit a particular interest group at the direct expense of everyone else; even if gasoline prices did increase as a result of increased exports, American producers and subsequently the larger domestic economy would be among those reaping the benefits of that expanded global market. It really is that simple.

Gasoline prices depend partially on crude oil prices, but also depend on many other factors, including refining capacity. The United States has not built any new refineries since 1983, and expansions of existing refineries are severely limited by environmental regulations. If the USA doesn’t have enough refining capacity to supply the domestic gasoline or diesel fuel market, it may need to export crude and import refined fuels, in effect paying another country to refine our crude!

We need to loosen the environmental restrictions on refinery construction, which would both create thousands of new jobs and reduce the prices of refined fuels. But the Obama Administration, in its infinite wisdom (?), has decided to impose new regulations on carbon dioxide emissions from refineries!!!

Steve Z on December 13, 2013 at 3:48 PM

I work in the oil patch, and I’m internally divided on the export ban. I think I’d prefer to have the US continue to refine at home. That’s where the real profit is. I think exporting crude is similar to exporting manufacturing.

And we all know how well that’s working out…

OTOH, we don’t allow enough refineries to be built (EPA, anyone?) so the lowering of the international price would surely follow the lifting of the ban.

How about a compromise? Let’s start building more refineries, instead.

Wino on December 13, 2013 at 3:52 PM

Keep the oil here. Store it up.

We’ll need it for the resource wars of 2077.

Spade on December 13, 2013 at 3:57 PM

This does not make sense… Our oil production is less than half of what we consume and we are importing 60% of our oil needs… It is not going to be cheaper to export oil overseas when all of it can be consumed domestically…

mnjg on December 13, 2013 at 4:10 PM

So lets get this straight: we’re pumping oil at a record pace but we can’t export it or refine it? So where the Hell is it going, breakfast cereal?

clippermiami on December 13, 2013 at 4:13 PM

So lets get this straight: we’re pumping oil at a record pace but we can’t export it or refine it? So where the Hell is it going, breakfast cereal?

clippermiami on December 13, 2013 at 4:13 PM

Our oil production is around 40% of what we consume so it does not make sense to export our oil when we can consume all if it domestically and we still need to import the remaining 60% of our need…

mnjg on December 13, 2013 at 4:15 PM

When I look at the picture, why do I think “Harry Potter?”

EdmundBurke247 on December 13, 2013 at 4:15 PM

How about a compromise? Let’s start building more refineries, instead.

Wino on December 13, 2013 at 3:52 PM

Amen to that…

mnjg on December 13, 2013 at 4:15 PM

So lets get this straight: we’re pumping oil at a record pace but we can’t export it or refine it? So where the Hell is it going, breakfast cereal?

clippermiami on December 13, 2013 at 4:13 PM

It’s backing up.

Wino on December 13, 2013 at 4:20 PM

http://fuelfix.com/blog/2013/12/06/crude-oils-backing-up-along-the-gulf-coast/

I wonder why my link didn’t post at 4:20.

Wino on December 13, 2013 at 4:21 PM

Steve Z on December 13, 2013 at 3:48 PM

We have plenty of refining capacity, even over capacity. PEMEX has been sending crude oil to Houston for decades now to be refined and in return they get gasoline.

BTW, crude oil for Alaska’s North Slope is the only oil exempted from the export restriction. Yes we do export crude oil from Alaska, just like we export LEAD from Alaskan mines.

Kermit on December 13, 2013 at 5:00 PM

BTW, Alaskan crude has stayed on the West Coast or exported to the Far East for a couple of decades now. It ain’t coming east of the Rockies.

Kermit on December 13, 2013 at 5:02 PM

the problem is that there is no economic way to transport crude from where it is produced to the East Coast. It is cheaper to import crude by ship than ship from say Bakken via rail. Refineries in the Caribbean (Puerto Rico & St. Croix) were economical only to process imported crude then ship it to the East Coast and South Florida markets. They avoided paying import duties. Those U.S. Refineries are all closed as being uneconomical.

Kermit on December 13, 2013 at 5:07 PM

mnjg on December 13, 2013 at 4:15 PM

the vast majority of imports have been from Canada. Not all crude oil is the same and Canadian is more like Venezuelan. We need Keystone XL to kick Venezuelan crude out of the U.S. No other will do in certain refineries.

Kermit on December 13, 2013 at 5:13 PM

I thought The One and his minions were all for “energy independence”?

It seems to me that refining our own crude here and using it here would be a big step toward that.

Which probably explains why the administration wants to do just the opposite.

I’d have expected more sense from a (relative) conservative like Murkowski.

As for Moniz, he still reminds me of Gorgan the “Friendly Angel”. So I’m neither surprised or taking his advice.

clear ether

eon

eon on December 13, 2013 at 8:47 PM

I think Valarie has her hand up more than one person’s behind….

This one really does look like Howdy Doody…..how he’d look today.

avagreen on December 13, 2013 at 8:48 PM

Don’t worry, leftists will be along shortly to curtail any economic progress.

virgo on December 14, 2013 at 2:11 AM

“Sen. Murkowski believes the debate on energy exports is coming sooner rather than later…”

This phrase pisses me off. Why would you say ‘sooner rather than later?’ Sooner or soon MEANS not later.

-I decided to paint the house whiter rather than blacker.
-I bought something more car-like rather than motercyclish.
-I’m going to mow the lawn rather than let it get tall.
-I’m eating a hamburger rather than a cheeseburger.

It really bugs the crap out of me. That, and using ‘disconnect’ as a noun. The noun is ‘disconnection’, you goofy politicians.

Kevin M on December 14, 2013 at 1:40 PM