Enacted during a bygone era, there exists an argument that the ban on US crude export is indeed antiquated. With crude prices dropping below $35 per barrel and national average gasoline prices falling almost to $2 per gallon, it is clear the world and the US in particular are relatively awash in oil. Jason Bordoff, a former energy adviser to President Obama recently testified on Capitol Hill stating “restrictions on free trade of energy are a legacy of a bygone era that doesn’t reflect the realities of today”. With no need to further protect the US from import crude dependence, proponents for the ban lift want to reap the benefits of free cross-border trade.
Those in favor of the ban removal cite the potential long term low gas prices and increase in jobs as positives for the legislation. Allowing US producers access to the world market would give refiners the opportunity to sell to others willing to pay a higher price. The open market would even out the current discounted sale of US crude to the Brent standards, allowing for lower gas prices over a longer term
The increase in domestic output would also help the industry’s labor market as well. Given the 100,000 jobs lost already, many involved in the industry see this as the biggest positive. A study put together by the ASPEN Institute by Executive Director Thomas J. Duesterberg and Director of Economic Studies Donald A. Norman predicts that the industry would benefit from over 600,000 added jobs in production, mining, and constructions sectors, peaking in 2019. Along with a 0.93% increase in GDP, a 2.2% increase in real household income, and increases in capital investment for domestic companies, the study shows clear benefits for the industry as a whole.
The legislation does not come unopposed however. Many groups including domestic refiners and environmental groups see the legislation as a step backward.
US refiners have always benefited from the export ban, allowing companies to buy cheaper crude and sell at higher prices after processing. The Energy Information Administration predicts that refiners would have to cut jobs and suffer losses approximating $22 billion of annual profits by the year 2025 if the ban were to be lifted. Other groups such as The American Fuel & Petrochemical Manufacturers, a Washington-based industry group, oppose the export ban and other refinancing incentives, claiming that it would detrimentally harm over 35 percent of U.S. refiners. Senior analyst Jeff Dietert of Simmons & Company International called the potential ban lift a “modest negative for refiners.”
In looking to help refiners if the ban were to be lifted, many different production incentives have been introduced to the bill. Democratic Senator Tom Carper (Delaware) proposed a tax credit of up to $3 a barrel to independent refiners while another initiative aims to raise the tax credit to 9 percent from 6 percent. Still, some have doubt that this will be enough to help domestic refiners. Republican Senator John Hoeven (North Dakota) claims that the refiners’ credit would cost $7 billion over 10 years and may blockade the bill from being passed.
To further complicate matters, environmental issues are being raised, pointing out that lifting the export ban goes against sentiments discussions at the Paris Party meeting this past weekend. The Sierra Club is in strong opposition, stating that “[The export ban lift] would be a major giveaway to the oil industry at the same time the rest of the world is working diligently to forge a deal to combat climate change.” While others, such as David Turnbull, Campaign Director for Oil Change International, said that lifting the crude-export ban “would absolutely undercut the message the Obama administration is trying to send”.
To help curb environmental concerns, different initiatives are being introduced to support renewable energy promotion. Democratic Senator Edward Markey (Massachusetts) said there would need to be renewed tax breaks for wind and solar energy for at least 10 years and should be “tied in terms of size and scope” to benefits that oil companies receive from the export ban. From the industry point of view, Kevin Book, managing director at ClearView Energy Partners LLC agrees that if longer renewable energy tax breaks are offered, the entire industry will benefit in the long run.
Only time will tell if the proposed changes or upcoming presidential election will change the export ban’s future as law makers try to wrap end of the year discussions.