By April 22, 2015 Read More →

American crude oil export ban has to go

Crude oil export ban lowers prices received by American energy producers

Alaska Senator Lisa Murkowski (R) says she will introduce a bill to end the 40-year-old domestic crude oil export ban. It’s about time.

crude oil export ban

Alaska Senator Lisa Murkowski. Photo: Handout.

Murkowski was speaking at the 34th CERAWeek – an annual gathering of international energy experts and leaders in Houston, TX – and noted that many federal energy policies are “alarmingly deficient and outdated.”

“America has entered an era of energy abundance. Imports are down, and so are prices. We are on the verge of being able to help our allies and trading partners with our energy – instead of competing with them for supply from others,” said Murkowski, the chairman of the Senate Energy and Natural Resources Committee.

There are two reasons to end the crude oil export ban.

First, the ban is inherently unfair given that the nuclear deal recently negotiated with Iran could unleash 1 million barrels a day of Iranian oil production onto the global market. As Murkowski says, “We should not lift sanctions on Iranian oil while keeping sanctions on American oil. It makes no sense.”

Second, the ban has serious economic consequences for producers and the national economy.

Consultancy IHS released a study, Unleashing the Supply Chain: Assessing the Economic Impact of a U.S. Crude Oil Free Trade Policy, a month ago, noting that the ban causes US crude prices to be discounted versus international crude. The difference in price between international (Brent) and domestic (West Texas Intermediate) crude recently widened, ranging from $7 to $12 per barrel.

crude oil export ban

Crude oil export ban bad for the American economy, says IHS study.

That differential is tough enough for American producers to absorb when oil prices are well north of $100 a barrel, but now that prices are half or less of their 2014 peak, drilling rigs are being idled, service companies are laying off thousands of workers, and the oil industry is suffering.

“At current prices, the spread between Brent and WTI pricing will be the difference between the viability and non-viability of a great deal of new investment,” said Kurt Barrow, IHS vice president, downstream energy.

If ending a ban enacted in 1973 that was designed to work with price controls and a completely different global energy scenario can narrow or erase that differential, making American oil producers more competitive, why would Congress – and President Barack Obama – not get behind Murkowski’s bill?

Another good argument ending the ban is the impact on the energy industry supply chain – products and services that range from steel and nonferrous metals to engines, pumping equipment, construction, professional services and railroads. The IHS study shows that the energy supply chain alone would add $26 billion to American GDP per year (2016-2030) and 124,000 new jobs annually.

Texas and California – oil-producing states with diverse manufacturing industries that supply energy producers – would be the biggest beneficiaries of ending the crude oil export ban. IHS estimates that ending the crude oil export ban would generate another 394,000 national jobs annually, $238 in annual household disposable income, and $86 billion more per year in GDP on average from 2016-2030. The increased economic activity would add $1.3 trillion to cumulative government revenues during that period and the increased supply of oil on the global market would lower U.S. gasoline prices by an average of 8 cents per gallon.

America needs to ditch its 1970s-era energy policy as soon as possible. Texas Railroad Commissioner Ryan Sitton argued on these pages that the US needs a new national energy strategy and if the Obama Administration isn’t prepared – or able – to craft one, then energy-producing states like Texas and Alaska will take the lead and do it themselves.

Murkowski ended her remarks to the CERAWEEK audience with a pledge to “find a way to have a rational conversation about energy policy” but cautioned that “there’s no guarantee of that in the current political climate, but we must make the attempt – to do our jobs and to legislate.”

Elected representatives like Lisa Murkowski should be applauded and supported for their efforts to reform the country’s outdated energy policies. Email Murkowski today with your support for her bill to end the crude oil export ban.

Posted in: Markham on Energy

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