Lawmakers wonder: Does the crude-oil export ban even make sense anymore?

posted at 6:41 pm on February 3, 2014 by Erika Johnsen

Just a few short years ago, almost nobody was expecting the speed and intensity with which the United States’ 38-year ban on exports of domestically produced crude oil would suddenly become one of the biggest national energy issues du jour, but it’s yet another testament to the burgeoning strength of the shale revolution brought on by fracking.

Domestic oil production has grown so rapidly and so dramatically that we’re actually looking at the prospect of a glut on our horizon, and to take better advantage of our boom we really need to 1) begin work on new infrastructure projects that can help us most efficiently and safely transport the fruits of our newfound oil- and gas-production capacity, hem hem, and 2) get rid of the economic travesty that is that doggone crude oil export ban. The ban was never a good idea — there are very few scenarios in which restrictions on free trade ever are, if you happen to be into things like jobs and prosperity — but it makes even less sense in the context of our recent energy boom. Fortunately, a good few lawmakers have been keeping up with that increasingly obvious fact, and working on getting the ball rolling:

At a hearing of the Senate Energy and Natural Resources Committee, lawmakers and policy experts weighed the price stability of oil in the United States, job creation, and national security considerations relating to the 1975 Energy Policy and Conservation Act. Created in response to the famous Middle East oil embargo and subsequent oil crisis in 1973, the law keeps all U.S. crude oil business within the country, while still allowing the export of refined oil and gases. …

Lawmakers and experts said improved technology, a weakened job market and the current “energy renaissance,” which includes a natural gas boom, are all reasons to reopen debate about lifting the ban and adding American crude oil to the global market. Congress remains fiercely divided over energy policy in general, making consensus on a legislative change difficult to reach. With modest aims, senators painted the hearing as just the start of a process.

“[This] is the beginning of many very considered and thoughtful discussions on what is a very timely issue,” said Alaska Republican Sen. Lisa Murkowksi, the committee’s top Republican.

The biggest objections on the subject, all too predictably, came from lawmakers of the protectionist mindset who are evidently convinced that allowing crude oil to leave America’s shores will result in higher prices for consumers at the pump — but even completely ignoring the economic gains for America’s economy from more open trade, that might not even be true in and of itself. Because our country’s refiners are allowed to ship gasoline and diesel abroad, lower domestic crude prices don’t necessarily translate into savings for American consumers. Mary Duenwald has a usefully short and simple explanation up at Bloomberg:

After all, even though U.S. oil producers are confined to the North American market, U.S. refiners do business around the world. They sell diesel to Europe and South America, and gasoline to China. Thus, refined products in the U.S. are still heavily influenced by global prices.

To use hoarding as a strategy to keep American consumer prices low, you’d have to restrict exports of not only oil but refined products, too.

By allowing oil exports, Congress would let oil producers take advantage of the higher worldwide prices. And there is no reason to expect this would raise consumer prices in the long term. In fact, it might even lower them — by removing a barrier to the global oil trade. “The less bottlenecks in a market, the less distortions there are,” Amy Myers Jaffee, an energy expert at the University of California at Davis, said. “And generally the less distortions, the lower the price.”

America’s longstanding hoarding mentality isn’t really helping anyone, and the good news is that the Obama administration doesn’t seem dead set against the idea — but there’s still a lot of duking-out to be done in Congress.


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That photo…hurts.

Rational Thought on February 3, 2014 at 6:51 PM

We shouldn’t be paying three-fifty at the pump.

davidk on February 3, 2014 at 6:52 PM

Speaking of Oil:

Keystone pipeline debate
2h
President Obama says Secretary of State John Kerry to ‘give me a recommendation’ on Keystone pipeline after review – @FoxNews interview via @Reuters
end of alert
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https://twitter.com/FoxNews

canopfor on February 3, 2014 at 6:54 PM

Domestic oil production has grown so rapidly and so dramatically that we’re actually looking at the prospect of a glut on our horizon
=============================================================

A Glut,…thats POISON to the ears of EnVironmentalWackoBirds!!

canopfor on February 3, 2014 at 6:57 PM

Wrong, it does make sense.

The oil cos. bought their leases with the export ban. Any changes to the ban must caue a renegotiation of the lease.

It makes absolutely no sense for the US to export POL.

aniptofar on February 3, 2014 at 6:58 PM

BLM
===

Recent Oil & Gas Lease Sales
****************************

Below is a table of oil and gas lease sales by BLM State Offices since January 1, 2013. For additional information, please contact the individual state offices. A table showing data for January 1, 2009 through December 31, 2012 is available here (PDF).

http://www.blm.gov/wo/st/en/prog/energy/oil_and_gas/recent_lease_sales.html

http://www.blm.gov/wo/st/en/prog/energy/oil_and_gas.html

canopfor on February 3, 2014 at 7:14 PM

Government needs to get out of the energy business, period. Please feel free to replace “energy” in the last sentence with any word in our language.

Wine_N_Dine on February 3, 2014 at 7:24 PM

ON NOW LIVE: Chris Christie

George Washington Bridge ramp closings scandal
7m
New Jersey Gov. Chris Christie: ‘Unequivocally,’ he had no knowledge of lane-closure plans – @CBSNews live video
read more on cbsnews.com
===========================

http://www.cbsnews.com/videos/live-video/

canopfor on February 3, 2014 at 7:33 PM

It’s nice to see Murkowksi taking a break from promoting ABORTION and demanding more taxpayer-funding for Planned Parenthood.

Pork-Chop on February 3, 2014 at 7:43 PM

There is an argument about domestic production vs. foreign imports…

Should we strip America first, or use foreign sources (even at a high cost) until they are depleted, then our own energy reserves.

I don’t really take a side on this, but is really is a strategic debate to be made.

So… should we use up America’s energy reserves at present cheap prices, or should we use import sources until they are hyper-expensive and then keep our reserves for ourselves?

Just askin’

DaveK on February 3, 2014 at 7:49 PM

Different refineries use different types of crude oil. Eagleford and Permian (more than Bakken) are having to undergo splitting operations with the condensate taken to LOOP to be sent north via pipeline to Canada. The remaining crude oil is being shipped via tanker to East Coast. Gulf Coast needs more heavy crude from Canada. We could be trading different crude oil for crude oil more suitable on a refinery by refinery basis. It would be like shifting soft red wheat to France for pastries and receiving winter wheat from France for making bread. Not that we don’t produce and overabundance of both here, just as an example of different types of the same commodity.

Kermit on February 3, 2014 at 8:02 PM

davidk on February 3, 2014 at 6:52 PM

It costs real money to drill those tight shale wells, to transport to a refinery, to refine, and then to distribute the products. Gasoline is the least profitable (when it is) product of a refinery.

Kermit on February 3, 2014 at 8:08 PM

We are still importing 7M barrels per day – 3.3M from OPEC as of November 2013.
So let’s trim that down first! The Keystone XL goes to the wrong place. We need crude and oil products in the rust belt and east coast not TX!

KenInIL on February 3, 2014 at 8:21 PM

KenInIL on February 3, 2014 at 8:21 PM

Middle Eastern crude is mostly going to West Coast & Hawaiian refineries (Alaskan is to sour for Hawaiian refineries). We are not going to be completely independent of Canadian and Mexican crude oils. We have almost ZERO crude oil like that found in Canada, and none outside of California’s Kern Basin, or Nevada’s Railroad Valley of similar type for making the same products we now use Venezuelan for.

You are quite ignorant of where Canadian crude goes. 1. The only refineries able to process it 10 years ago were found in Texas, Louisiana and California. 2. Most of the major refinery expansions in the last decade were in IL, IN and OH. This enabled them to process Canadian crude and its already going to them via pipeline, relegating Capline (1.2 million bpd) to shipping lease condensate (from Eagleford and Permian basins) from LA to Canada as diluent to enable Canadian crude to flow south.

Kermit on February 3, 2014 at 8:38 PM

If our domestic producers are allowed to realize higher prices, they will invest in more domestic production and the infrastructure to handle it. These will be sunk costs and will remain in place if there should later be an oil supply interruption that again requires curtailment of export. Thus, allowing exports will make us more energy independent rather than less. Obviously, the jobs and tax revenues are also desirable even if there is a short-lived increase in domestic petroleum product prices while the supply side of the market clearing price equation catches up to a new equilibrium.

KW64 on February 3, 2014 at 9:04 PM

So… should we use up America’s energy reserves at present cheap prices, or should we use import sources until they are hyper-expensive and then keep our reserves for ourselves?

Just askin’

DaveK on February 3, 2014 at 7:49 PM

While prices are high and we have a technology edge, we should take advantage as much as we can. Technology may change to where oil is less valuable in the future or foreign producers may up their capacity as they utilize new technologies and undercut our price advantage. Let’s make hay while the sun shines and the unemployed people available to work these good jobs are available.

KW64 on February 3, 2014 at 9:11 PM

We shouldn’t be paying three-fifty at the pump.

davidk on February 3, 2014 at 6:52 PM

Why not, exactly…?

JohnGalt23 on February 3, 2014 at 11:55 PM

You won’t see the price of gasoline fall to an ideal cost because of the tax revenue. Here in NYS it’s 19% on each gallon of gasoline. You do the math. Our government is desperate for any tax revenue and while we scream and holler we continue to pay the price. Alcohol and tobacco taxes are out of sight yet our poor who smoke a named brand pay eighty dollars a carton a week, again you do the math. A beer runs about three bucks a bottle at a bar, a mixed drink about five. If you get a DUI expect marks on your drivers license, a raise in your car insurance, mandatory classes for alcohol abuse; added up it’s over ten grand by the time your clean again. Again, you do the math.

mixplix on February 4, 2014 at 7:27 AM

DaveK on February 3, 2014 at 7:49 PM

Kind of a weak argument to my mind. It assumes a peak oil and frozen technology outlook that has no basis in anything we have seen or experienced.

While it gets more expensive to find more oil – it is clear we have much more available than we thought and that more of it is continued to be made than we clearly understand. Now, eventually, it is fair to question what happens when scarcity really does set in – more likely well past our lives and those of many generations – but at that time, pricing pressure will facilitate the expansion and eventual mastery of new forms of energy technology. Hoarding what we have limits growth and prosperity now, and makes us less ready for the future as well.

Zomcon JEM on February 4, 2014 at 8:54 AM

I’m far more interested in limiting imports of oil than I am in increasing exports.

When we get imports down to zero barrels a day, we can have this discussion.

Chris of Rights on February 4, 2014 at 9:42 AM

Chris of Rights on February 4, 2014 at 9:42 AM

this means that you are interested in refineries spending billions of dollars which they will never recoup?

Kermit on February 4, 2014 at 11:56 AM