Are Oil Exports on the Horizon? House OKs Bill
UPDATED
An effort to shelve the 40-year-old ban on exporting oil from the U.S. is gaining steam as lawmakers in the House voted in favor of the move on Friday.
The U.S. has prohibited companies from shipping oil overseas since the energy crisis of the 1970s. With domestic production going strong and oil prices near $50 a barrel, industry heavyweights such as Exxon Mobil (NYSE:XOM) have urged the federal government to reconsider its policy.
Legislation is making its way through both chambers of Congress amid pushback from the Obama administration. As expected, the House passed a bill to end the government’s ban on the exportation of American oil by a vote of 261-159.
In addition to the House’s plan, a separate bill cleared the Senate Banking Committee by a 13-9 vote last week. The lone Democrat to support it was Sen. Heidi Heitkamp (D-N.D.), who sponsored the bill. The House bill, which faces a possible filibuster in the Senate, attracted 26 votes from Democrats.
Criticism has centered on worries that retail prices for refined products, mainly gasoline, would increase as oil is diverted to overseas buyers. However, according to the U.S. Energy Information Administration, gasoline prices would be left unchanged or even decline in the event that exports get a green light. Drillers would likely ramp up production rather than export from their normal oil supplies.
President Barack Obama acknowledged this outcome in his opposition to the proposal, saying he would veto the bill if approved by the House and Senate. Congress should focus on “supporting our transition to a low-carbon economy,” the White House said, adding that “legislation to remove crude export restrictions is not needed at this time.” Meanwhile, environmentalists have said ending the ban would encourage companies to drill more.
Republicans, with the support of some Democrats, are forging ahead on Capitol Hill. Rep. Kevin Cramer (R-N.D.) argued that oil exports would create energy jobs in the U.S. and bolster national security by lessening allies’ dependence on oil from Russia and the Middle East. He also noted the Obama administration’s plan to end oil sanctions on Iran as part of a nuclear agreement.
“We’re the only country in the world that doesn’t allow the exporting of oil. In fact, now that the president is allowing Iran to do it, it seems only sensible that we would,” Cramer said during an interview Thursday on the FOX Business Network’s “Varney & Co.”
The American Petroleum Institute, a trade group representing oil and natural gas companies, has run television ads in support of the bill.
“Even experts within the administration recognize that free trade in oil could benefit American consumers and create U.S. jobs,” API Executive Vice President Louis Finkel said. “Lawmakers are simply updating the law to reflect that 1970s-era restrictions don’t make economic sense in an era of U.S. energy abundance.”
Aside from the surge in U.S. energy activity, the impact of exporting crude could be minimized because refined products and condensate—a lightly processed form of oil—are already eligible to be shipped out of the country.
Domestic crude output has jumped from 5.4 million barrels per day in 2009 to 8.7 million b/d last year. U.S. production, particularly growth in shale plays, contributed to a global supply glut, and oil prices have been cut in half compared to their highs of 2014.