The pressure’s mounting.
Oil producers are stepping up a campaign to end the country’s tight restrictions on crude-oil exports, which they say could boost the American energy economy while also redoubling allies’ energy security abroad, particularly in Europe.
“Additional exports could help increase supplies, put downward pressure on the prices at the pump, and bring more jobs to America,” Kyle Isakower, vice president for regulatory and economic policy at the American Petroleum Institute, said in a statement to reporters. “Access to foreign customers could drive significant investment in U.S. production, helping to strengthen our energy security. Now that the U.S. is poised to become the world’s largest oil producer, the economic case for exports is clear.”
A House Foreign Affairs Committee panel was scheduled to talk crude-oil exports at a hearing Wednesday afternoon.
The export restrictions – often incorrectly referred to as an outright ban – date to 1975, when the U.S. implemented the Energy Policy and Conservation Act to sharply limit oil exports. The measure was a response to the oil embargo imposed by several Arab countries two years before: lawmakers hoped curtailing exports would increase the domestic energy supply, insulating the country from volatile global energy markets.
It’s hard to say whether the strategy worked – imports dropped in the late 1970s and early 1980s, only to rise again through the next 20 years.
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Since 2006, though, oil imports have been falling – last year, they reached their lowest level in 20 years, the Energy Information Administration said. Much of that is due to the country's huge domestic production boom, most of it in the Midwest. With stockpiles soaring, and debate growing on Capitol Hill regarding whether to lift similar export restrictions on liquefied natural gas, oil producers have redoubled efforts to bring about the end of the so-called ban.
The reasons are twofold. The first is simple: allowing exports would drive-up demand for American oil, therefore raising prices. The second is slightly more complicated: The oil that the U.S. is producing is what’s known as light, sweet crude. But American refineries along the Gulf Coast, where most of the oil is being transported, were outfitted to treat heavy crude.
“Over the last decade, our refining system spent billions of dollars to invest in heavy coking capacity and other capabilities to take more heavy oil, the kind you import from Venezuela and Canada,” says Jason Bordoff, former senior energy adviser to the White House and a public affairs professor at Columbia University. “A decade ago, that’s what everybody thought that we’d be doing. But suddenly, the world looks quite different – the U.S. is producing millions more barrels of oil a day, and all of that growth has come in the form of light, sweet crude production.”
To refine light, sweet crude at a facility that’s been outfitted to take heavy crude, it has to be blended with heavy oil, and the resulting products, such as diesel fuel, fetch less money on the market. Gulf Coast refineries, as a result, refuse to pay top-dollar for light, sweet crude.
Refineries overseas, however, are equipped to refine light, sweet crude. What’s more, many are located in Europe, which is heavily reliant on Russia for its energy supplies – a relationship that’s grown far more fraught since Russia’s armed takeover of the Crimea region of Ukraine last month.
“The Russians have proven to be an unreliable diplomatic – and otherwise – partner from their recent activities,” says Paul Sullivan, a professor of economics at National Defense University and an adjunct at Georgetown University. “The U.S. could change the geopolitical as well as the geoeconomic landscape for oil if these exports are allowed. And as an economist and as a national security expert, for me this is a no-brainer.”
Unlike liquefied natural gas exports, which face lengthy reviews by the Energy Department and the Federal Energy Regulatory Commission, and also require expensive import and export terminals, exporting oil is relatively easy.
