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Will Congress End the Crude Oil Export Ban?

A bill to repeal the 40-year-old ban on crude oil exports from the United States has made its way through committee and will be heading to the floor of the House.  Recently, the House Energy and Commerce Committee voted 31-9 in favor of repealing the ban, but the measure still faces stiff debate on a host of issues.  Here is a quick breakdown of talking points from both side

Free Trade: Proponents of ending the crude oil export ban are trying to frame the issue in terms of the larger debate about free trade.  This helps build a base of support in the business world for the bill beyond easily vilified oil companies.  The CEO of the mining company BHP Billiton recently came out strongly in favor of repealing the ban, faulting recent protectionist policies for stifling global trade and American job creation, innovation, and economic growth over the past decade.  He called on Congress to “revise its policies on the trade in natural resources, particularly the crude-oil export ban,” in order to make a stand in favor of open markets.  Whether proponents can successfully cast this as a win for free trade instead of a win for big oil remains to be seen, although lawmakers seeking to retain the ban do not appear to be convinced.

Gasoline Prices: Consumers and concerned politicians worry that lifting the oil-export ban will lead to higher gasoline prices.  It is possible that ending the export ban would raise gasoline prices ever so slightly as the price of oil produced in the United States rises slightly and comes in line with the global benchmark price.  The differential between the two is currently under $10/barrel, so the overall impact will be minimal.  The real pressures forcing gasoline prices upward in the United States are a lack of sufficient refining capacity and ethanol mandates, neither of which would be impacted by lifting the crude oil export ban.  Yes, the United States has a glut of oil, but so does the rest of the world.  Letting companies try to export their oil out of the United States, under the current circumstances, will not fundamentally effect the availability of oil for consumer use.

Strategic Leverage: It has long been assumed that the United States can use oil as a strategic advantage in foreign affairs.  This has been true in the past, as when Eisenhower withheld oil from UK and France in order to compel these countries to withdraw their troops from Egypt during the Suez Canal crisis in 1956.  But can the United States still leverage its petroleum for diplomatic advantages today?

Oil is a readily available commodity.  It is not, as one Congressional representative claims, a peaceful tool that could replace weapons of war.  The likelihood that the United States will be able to “hold Vladimir Putin in check” using its oil exports is a fantasy.  Eastern Europe is utterly lacking in the infrastructure needed to accept oil from the U.S., whereas Russia controls all of the pipelines connecting Eastern Europe to Russian oil and gas.

Another popular refrain on Capitol Hill is: if we are lifting the embargo on Iranian oil, we should do the same with American oil.  The truth is that while a little parity might make opponents of the Iran Nuclear Agreement feel better, a thriving American crude oil export industry will not provide the United States any leverage against Iran under the current global conditions.

Environment: The most popular argument on Capitol Hill against ending the export ban is that it would increase global petroleum consumption and further climate change.  This argument is specious because petroleum supplies already outpace global demand.  Adding more supply to that glut will not substantially increase demand, nor will it impact the climate.