Oil ex­port ban re­peal would lower gas prices, stud­ies show

The Washington Times Weekly - - National - BY PA­TRICE HILL

The U.S. gov­ern­ment has banned oil ex­ports since the en­ergy cri­sis of the 1970s, but that could change next year as Repub­li­cans take con­trol of Congress and are backed by new stud­ies show­ing that re­peal of the ban would ac­tu­ally lower gaso­line prices and be a sur­pris­ing boon to con­sumers.

Sen. Lisa Murkowski, Alaska Repub­li­can and the ex­pected new chair­woman of the Se­nate Com­mit­tee on En­ergy and Nat­u­ral Re­sources, has been the lead­ing pro­po­nent in Congress for end­ing the ban, ar­gu­ing that a sea change in the way oil and gas prices are de­ter­mined in global mar­kets has turned it into a relic of a past era of fuel scarcity, one that is in­creas­ingly harm­ing the out­look for the na­tion’s boom­ing shale oil in­dus­try.

Ms. Murkowski cites stud­ies by the Gen­eral Ac­count­abil­ity Of­fice and pri­vate firms that found lifting the ban would do the op­po­site of what politi­cians and con­sumers have al­ways ex­pected. Rather than rais­ing gas prices as more U.S. oil is sent to global mar­kets, it would drive pump prices down thanks to a re­cent change in the way gas prices are set.

“The price Amer­i­can driv­ers pay for gaso­line at their lo­cal sta­tion is linked to the price of oil set by the global mar­ket,” she noted re­cently. “Ex­port­ing U.S. oil to our friends and al­lies will not raise gaso­line prices here at home and should, in fact, help drive down prices” by low­er­ing the global price for oil.

Ms. Murkowski’s ar­gu­ment is likely to get back­ing soon from an au­thor­i­ta­tive source: The En­ergy In­for­ma­tion Ad­min­is­tra­tion is due to publish a de­fin­i­tive re­port on the sub­ject, and is ex­pected to largely agree with pri­vate as­sess­ments that the prices for gaso­line, diesel and jet fuel would go down or be lit­tle changed by a re­sump­tion of U.S. crude ex­ports.

De­spite the grow­ing ar­gu­ments for lifting the ban, an­a­lysts ex­pect Ms. Murkowski to go slow in broach­ing the sub­ject in Congress next year be­cause of lin­ger­ing op­po­si­tion and po­lit­i­cal minefields that might be laid by Democrats. En­ergy Sec­re­tary Ernest Moniz a year ago said he was open to the idea and would study it, but he has since backpedale­d in the face of ob­jec­tions raised by con­gres­sional Democrats. In re­cent state­ments, he has stressed that the U.S. needs to be cau­tious as it still must im­port a lot of oil to meet its own needs.

“Changes to ex­port poli­cies are con­tro­ver­sial and com­pli­cated,” said Josh Zive, an­a­lyst at Bracewell & Gi­u­liani, not­ing that two key Demo­cratic se­na­tors this sum­mer erupted in anger when the Depart­ment of Com­merce un­ex­pect­edly loos­ened its ex­port li­cens­ing re­stric­tions for lightly pro­cessed con­den­sates pro­duced in shale wells — a move that was wel­comed by the shale drilling in­dus­try and led to a surge in crude ex­ports since June.

The ban, im­posed in the wake of the 1973 Arab oil em­bargo, al­lows the sale abroad of re­fined fuel such as gaso­line and diesel but blocks most ex­ports of oil it­self. Canada is the one ma­jor econ­omy not af­fected by the ban.

The Com­merce Depart­ment move was hailed as a step to­ward lifting the ex­port ban, but the depart­ment ve­he­mently de­nied any change in pol­icy after re­ceiv­ing a tongue-lash­ing af­ter­wards from Sen. Ed­ward J. Markey, Mas­sachusetts Demo­crat, and Sen. Robert Me­nen­dez, New Jersey Demo­crat. That episode showed how some lib­eral Democrats are still de­ter­mined to pre­serve the ban and are likely to fight any ef­fort to end it, Mr. Zive said.

More­over, the ex­port is­sue is com­pli­cated by the fact that it pits drilling com­pa­nies against another pow­er­ful pe­tro­leum in­dus­try in­ter­est group — re­fin­ers — which ben­e­fits from to­day’s de­pressed prices for U.S. crude oil and which has ob­jected to al­low­ing the oil to be ex­ported to mar­kets over­seas, where it would fetch higher prices, he said.

“Re­fin­ers and elected of­fi­cials con­cerned about U.S. gaso­line prices have de­fended ex­ist­ing re­stric­tions as be­ing in the best in­ter­est of U.S. con­sumers and na­tional se­cu­rity,” he said. “Be­cause of the dif­fi­cult com­mer­cial and po­lit­i­cal is­sues in­volved in the en­ergy ex­port de­bate, it is un­likely that the pres­i­dent and the Congress will agree on any large pol­icy [changes]. In the short term, leg­isla­tive move­ment will likely be slow and in­cre­men­tal.”

But many econ­o­mists and oil ex­perts say the need for change on the ex­port ban could get ur­gent next year.

Rapidly fall­ing oil prices, which have dropped be­low $80 a bar­rel for pre­mium crude in New York this month from well over $100 dur­ing the sum­mer, are putting a ma­jor pinch on shale drillers, many of whom can­not make money if the price goes much lower and may have to start cut­ting back pro­duc­tion.

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