Tags: Barack Obama | crude oil | export ban | Obama | administration | not pressured | lift

Lift Crude Oil Export Ban? Obama Just Doesn't Seem That Into It

By    |   Tuesday, 05 May 2015 08:34 PM

Calls to lift the 40-year-old ban that keeps U.S. companies from exporting crude oil have grown louder, but it appears the Obama administration may not be that interested in repealing it.

And that may mean lifting the ban — described by a former administration official as a decision that is "clear" and "easy" — may not happen until President Barack Obama leaves office in January 2017.

"In a situation where we still import 7 million barrels of crude oil per day, I don't think an overly compelling argument has been made on the basis of pragmatic economics," U.S. Energy Secretary Ernest Moniz said while attending an energy conference in Houston in April.

"It sounds like [the Obama administration is] starting from a position of maintaining the status quo, rather than looking for a reason to change things," said Sam Margolin, lead analyst for refining and marketing at Cowen and Company, an investment banking firm based in New York City.

The ban can be lifted by the executive branch, but it can also be repealed by congressional action, which tells Margolin the political clock is ticking.

"We think the export ban has a better chance to be repealed in 2015 than 2016, because 2016 will be an election year," Margolin said at the Platts Rockies and Oil and Gas Conference in Denver last week. "We see continued paralysis on this issue."

U.S. oil producers are pushing hard on Capitol Hill to repeal the ban, but even some of the ban's harshest critics acknowledge the Obama administration appears to be tapping the brakes.

"Not this year, no," said Chris Faulkner, CEO of Breitling Energy in Dallas. "I think the president is going to be very difficult to allow us to export crude full-steam ahead."

The Energy Department does not issue export licenses — that's the responsibility of the Commerce Department — and Moniz emphasized he was not making "a statement in support of or against the idea of exports," but the remarks indicate ditching the ban may face steep bureaucratic hurdles that may grow higher as the 2016 election campaign ramps up.

"I don't think it's too late by any means" for a deal to be struck this year, Margolin said, but if the debate goes into next year, he's much more pessimistic.

"During an election year decisions are likely to be met with a lot more scrutiny and debate is probably going to be a lot more heated and if it becomes a partisan issue, it's difficult to see either side giving way," Margolin told Watchdog.org in a telephone interview.

The remarks by Moniz were telling because just a year and a half ago, the energy secretary himself gave the ban's critics hope.

"There are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s," Moniz said in December 2013.

But since then, Moniz has been much more measured when talking about the ban, which was put into place in the wake of the Arab oil embargo in the 1970s.

At that time, Congress passed and then-President Gerald Ford signed the export ban into law to make sure the country's oil supplies remained at home in an effort to keep the United States from being vulnerable to manipulations by the Organization of Petroleum Exporting Countries (OPEC).

Critics of the ban say the energy world is much different now than it was 40 years ago.

It amounts to "a sanctions regime against ourselves," said Republican Sen. Lisa Murkowski of Alaska, one of the biggest supporters on Capitol Hill for repeal.

But the ban has its share of supporters in Congress as well as defenders in the energy industry — especially oil refiners.

"It helps insulate the United States from volatility and unpredictable global crude markets," Jay Hauck, executive director for Consumers and Refiners United for Domestic Energy, told NPR. "For us to simply unilaterally disarm seems unwise."

In addition, refineries in the U.S. spent an estimated $85 billion to fit their operations to handle the heavier-type crude that's common in OPEC countries while most crude produced in this country is of a lighter variety.

"If we were to lift the export ban, we would send those U.S. refining jobs overseas along with our oil," said Democratic Sen. Edward Markey of Massachusetts.

There are also political risks involved, even in a Republican-led Senate and House of Representatives.

The reason? Politicians on Capitol Hill are leery that should lifting the ban coincide with a spike in the price of a barrel of oil — which would be accompanied by a rise in the price of a gallon of gasoline — that could leave them vulnerable to political opponents.

"They know that gasoline prices are the thing that the man on the street really cares about," said Herman Wang, senior oil news editor at Platts. "You can't do an Economics 101 lesson in a quick, two-sentence, 30-second soundbite. So I think it's going to be a very hard lift to do."

"As long as lawmakers are fearful that there will be political retribution because of price at the pump, it's going to be hard to get the votes we need to lift the ban," Murkowski said at the same energy meeting in Houston that Moniz attended.

Last fall, Lawrence Summers, the director of the National Economic Council for the Obama administration from 2009 to 2011, called for lifting the export ban.

"The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered," Summers said.

A number of studies have come out claiming the export ban costs the United States jobs and money.

The left-of-center Brookings Institution says lifting the ban could boost the U.S. economy between $600 billion to $1.8 trillion and save motorists up to 12 cents a gallon at the pump.

But environmental groups want to keep the ban in place.

"I think the last thing we need to be talking about is exporting fossil fuels," Jeremy Nichols, climate and energy program director for WildEarth Guardians, told Watchdog.org last fall. "We're struggling to try to rein in carbon pollution as a nation … Fair enough, we have security issues. Those don't trump climate change."

Rob Nikolewski is the National Energy Correspondent for Watchdog.org. He is based in Santa Fe, N.M. Contact him at rnikolewski@watchdog.org and follow him on Twitter @NMWatchdog.

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Calls to lift the 40-year-old ban that keeps U.S. companies from exporting crude oil have grown louder, but it appears the Obama administration may not be that interested in repealing it.
crude oil, export ban, Obama, administration, not pressured, lift, energy
Tuesday, 05 May 2015 08:34 PM
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