U.S. may soon ease oil-export restrictions

2014-01-03

The U.S. virtually banned the export of crude oil in the wake of the mid-1970s energy crisis. But as America pumps more crude, 2014 could be the year those constraints are lifted.

For decades, even discussing the possibility of exporting domestic oil was a nonstarter in Washington. Now, surging U.S. production has led to the beginning of a glut along the Gulf Coast, home to the largest refinery complex in the world. Too much crude is driving down prices, making producers eager to export oil to places like Europe where prices are higher.

Signs that the industry would challenge the export restrictions began appearing in the final months of 2013, with the American Petroleum Institute, the oil industry's main lobbying group in Washington, saying it was looking to end the ban. Last month, Ken Cohen, vice president of public and government affairs at Exxon Mobil Corp., the nation's biggest energy company, said it was time to rethink the prohibition.

U.S. Energy Secretary Ernest Moniz made a similar overture, remarking that the export prohibition dated from a time of energy scarcity.

Even as the first trial balloons were floated, politicians began to fight back.

"Easing this ban might be a win for Big Oil, but it would hurt American consumers," Sen. Robert Menendez, (D., N.J.) wrote the president. "Crude oil that is produced in the U.S. should be used to lower prices here at home, not sent to the other side of the world."

Some backers of ending the ban already argue that it would improve the trade deficit, experts say, while opponents will press for keeping oil at home with a goal of reducing dependence on Middle East production. Others will maintain that allowing exports would be bad for the environment.

"I think it will be a huge knockdown fight, because it pits environmentalists against national security hawks against producers against consumers," said Michael Webber, deputy director of the Energy Institute at the University of Texas. "It's a cage match for a multi-hundred billion dollar market."

Crude production is suddenly surging, mostly from shale formations in Texas and North Dakota. Plunging oil prices could slow the boom. But the Energy Information Administration forecasts crude production will rise by 24% to 9.6 million barrels a day by 2019, breaking the U.S. record set in 1970.

If the export restriction causes -- or appears to be about to cause -- problems, such as layoffs of energy workers, Congress might move quickly, said Jason Bordoff, a former senior energy adviser to President Barack Obama.

An actual change in the law is likely to take time. But given the confluence of politics with energy production and price pressures, 2014 "is likely to be a year where we seriously talk about oil exports," said Kevin Book, managing director at ClearView Energy Partners LLC, a Washington, D.C., political advisory firm.

Source from : MarketWatch

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