Changes in Store to the U.S. Crude Oil Export Ban?

As President Barack Obama stated in his 2015 State of the Union address, “today America is number one in oil and gas.”  With the high levels of domestic oil and gas production, many industry and political leaders are calling for the opening up of more markets through the repeal of the U.S. crude oil export ban.  While recent actions by the Department of Commerce have caused some to have hope for a loosening of the ban, statements from the Obama administration indicate that the ban may remain in place for the foreseeable future.

The U.S. crude oil export ban was implemented in the 1970s in response to the Arab oil embargo.  At the time, the export ban was intended to protect domestic oil production and reserves and ultimately reduce the import of crude oil.  The ban has certain limited exceptions, including exporting to Canada (but only for consumption within Canada) and exporting Alaska crude under special licenses.  Also, individual producers can seek permission to export.  The ban does not limit the export of gasoline or coal.

The growth in domestic oil production can be seen as the trigger for recent calls for the repeal of the export ban.  In particular, new markets are being sought due to the increase in domestic production of light crude and the limited number of domestic refineries able to process it.  A flood of studies and memoranda has been released recently (including by the Council on Foreign Relations, the Aspen Institute, Oil Change International and Brookings), with some calling for the end of the ban and others for its continuing existence.

Those in favor of continuing the ban include environmentalists, certain politicians and oil refinery lobbyists.  They argue that the ban is necessary to limit climate change and protect against oil price fluctuation and increased global competition.  Supporters of ending or loosening the export ban say that such action would lower gas prices through increased competition, create jobs because of increased production and allow the U.S. to play a more significant role in the global oil market.  Some have even suggested that lifting the export ban could serve as a counterattack to OPEC’s refusal to cut production despite the current low oil prices.

In recent years, Secretary of Energy Ernest Moniz has indicated a willingness to reexamine the ban.  In late 2014, the Department of Commerce approved certain pending requests to export processed oil.  In addition, it issued the clearest definitions yet of what constitutes exportable crude oil, setting forth six factors to be considered in determining whether oil is sufficiently processed for export.  While many saw this agency action as a pivot toward ending the export ban, days later a White House adviser stated that “there’s not a lot of pressure to do more.”  Because any presidential action to lift the export ban seems unlikely, the ball is in Congress’ court to loosen or eliminate the existing ban.

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