Depending on who's talking, lifting the longstanding limits on U.S. crude exports would be a boon to the economy and a benefit to U.S. drivers, or it would increase U.S. reliance on imported oil and weaken America’s foreign policy strategy.
The U.S. government restricted crude oil exports in 1973 in response to an embargo from Arab members of OPEC. Now, with U.S. crude oil production increasing, the case is being made both for and against lifting the ban.
For the week ending May 23, the U.S. Energy Information Administration (EIA) said crude oil production averaged 8.4 million barrels per day (bpd), a 16 percent increase year-on-year.
A new report from consulting group IHS says that lifting the ban would push that output to 11.2 million bpd. That, in turn, would save the United States about $67 billion per year on oil imports and lead to lower prices for retail gasoline, it says.
"At present, the current policy is discouraging additional crude oil supplies from being brought to market, which actually makes gasoline prices higher than they otherwise would be," IHS said.
Their argument is that more oil on the global market would push the price of oil down. That, in turn, would push gasoline prices lower because a good deal of what consumers pay at the pump is linked directly to the price of oil.
The IHS findings are similar to a March report from the American Petroleum Institute (API), an energy-industry lobbying group. API's report found that lifting the ban could spur the U.S. economy to grow by as much as $38 billion in 2020.
Both groups, however, may be looking at only a narrow slice of the pie.
Those in the downstream sector, the part of the industry that deals with refining and distributing products like motor gasoline, argue that U.S. oil is already cheap and say it’s a better idea to export refined products in the current market rather than increasing crude exports.
For those looking at the U.S. energy sector from a foreign policy perspective, meanwhile, there is no separation of domestic issues from international affairs. A report from the Brookings Institution says energy is more of a strategic commodity than a pure market asset and points out that oil prices impact the Chinese economy as much as the U.S. economy, so it's not a zero-sum game.
In January, U.S. Senators Ed Markey (D-MA) and Robert Menendez (D-NJ) argued that there's a strong case for keeping the ban in place. "New crude exports would be inconsistent with current law and would increase reliance on imports," they said.
They said the U.S. economy is linked as strongly to foreign oil now as it was before the ban was enacted, in the 1970s. And indeed, the EIA’s report for the week ending May 23 showed that the United States imported 1.3 million bpd more oil than it did the previous week.
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In early May, White House advisor John Podesta said the issue of crude oil exports was "under consideration."
So which side is right? As with every issue decided by Washington, the question of whether to lift or leave the export limit will likely be influenced more by politics than by pragmatism.
By Daniel J. Graeber of Oilprice.com
