Congress imposed a ban on US crude oil during the oil shocks of the 1970s in a move to get some control of gasoline prices. But U.S. crude oil production increased 74 percent from 2008 through 2014, leading to a glut domestically, where crude oil is selling at a discount relative to world prices.
The U.S. exports more than 550 thousand barrels per day of crude oil and another 120 to 140 thousand barrels per day of condensate, but producers can currently only access a handful of markets. Meanwhile, major oil refiners are sourcing stranded US oil at cut-rate prices, processing it, and then turning around and freely exporting more than 2.5 million barrels per day of gasoline, diesel, and other refined products at premium global prices.
With Senate Energy and Natural Resources Chair Lisa Murkowski leading the charge, rising congressional support suggests that there could be a vote to repeal the ban on U.S. crude oil exports in the next six months. Low oil prices have emboldened Congress to seriously consider lifting the crude oil export ban. At least 150 (128 representatives and 22 senators) have come out in support, and those numbers will likely rise after the August recess.
In the House, supporters are clustered in the Rockies and Plains states, as well as Texas, Arizona, Tennessee, and North Carolina. And if legislation is passed, opponents of crude oil exports will likely pressure President Obama to veto any legislation repealing the ban, so getting at least two-thirds support in the House will be an important priority.
In the Senate, 22 senators have publicly announced they support lifting the ban, and supporters say they are well-positioned to pass the legislation. But getting the 2/3 majority to override a veto will be tougher, as Murkowski and supporters will need at least a dozen Democratic votes and hold all the 54 Republican senators support the bill.
Many have hesitated to support repeal of the ban fearing voters will blame them if gasoline prices increase. Because gasoline is freely exportable, its price is already set globally regardless of how crude oil exports from the U.S. may or may not be restricted. And in July a Government Accountability Office review noted wide agreement among analysts that allowing crude exports would tend to decrease international oil prices, which could depress gasoline prices. As a result, many analysts predict that lifting the export ban would increase U.S. crude oil prices by $2 to $8 per barrel but reduce U.S. gasoline prices by 1.5 cents to 13 cents per gallon.
The President could rescind the ban by executive order, and would only have to demonstrate that doing it is in the “national interest.” (In 1996, President Clinton justified a blanket approval of Alaskan North Slope crude oil exports to Asia on the basis that the export decision was in the national interest and (1) would not “diminish the total quantity or quality of petroleum available to the United States,” (2) would not “pose significant risks to the environment,” and (3) would not likely “cause sustained material oil supply shortages or sustained oil price increases above world market levels” and hurt American consumers. While these national interest standards could be easily met today, the Obama administration’s priorities don’t support executive action to lift the ban. And he would be likely to veto any such legislation.