As US oil booms, Congress lifts 40-year oil export ban

The United States lifted a 40-year ban on oil exports on Friday, marking a historic shift for the booming US oil industry.
The measure was included in a massive $1.1 trillion spending bill that easily passed Congress and now heads to the desk of President Barack Obama for his signature.

While many Democrats opposed it, some joined Republican lawmakers and major oil companies who lobbied hard for lifting the ban, arguing it would create US jobs and boost the security of Washington's European allies.

"The facts are clear: lifting the ban is good for consumers, our economy, national security and energy security," said Senator Heidi Heitkamp of oil-rich Nork Dakota.

"By opening up US crude oil to the rest of the world, we would not only provide our allies with a more stable energy trading partner, but we would also reduce the power of countries like Russia, Venezuela, and volatile regions of the Middle East that use their energy dominance to exert influence over our nation and our allies," she said.

Environmentalists are concerned the move will encourage continued reliance on oil over clean energy, despite US pledges at the Paris climate summit to cut its carbon footprint.

"Dirty, dangerous fossil fuels need to be kept in the ground and liberalizing our export policy is exactly the wrong direction to take," said Friends of the Earth.

The nongovernmental organization also contended that the ban's repeal would "increase the frequency of exploding trains and oil spills across the country and in international waters."

- Born of oil shock -

The ban was first imposed in 1975 as the United States was reeling from the 1973-1974 Arab oil embargo, which dealt a heavy shock to the US economy and sent global prices shooting up.

Arab members of the Organization of the Petroleum Exporting Countries had banned oil exports to the United States in retaliation for Washington's support of Israel during the Arab-Israeli war.
Seeking greater energy independence, the United States created an emergency stockpile of crude oil, the Strategic Petroleum Reserve, in 1975 and banned most crude oil exports.

The export ban had a few exceptions. Some 491,000 barrels per day of crude were allowed to be exported from Alaska and California to Canada for domestic use, and imported crude could be re-exported.

With the end of the ban, all 9.2 million barrels produced in the United States a day and the 490.7 million barrels stockpiled commercially are available for export.

The president can still limit exports in case of a "national emergency," for national security reasons, or if exports cause domestic oil shortages or drive US prices sharply higher than world market levels.

But those conditions have receded in recent years as US oil production has boomed.

According to the Department of Energy, the United States could become a net exporter of crude oil in the next decade or so.

At nearly 282 million barrels per day in September, output is approaching its 1970 record of 310.40 million bpd and is almost double US production levels during the 2008 financial crisis which sank to about 147 million bpd.

Lifting the ban, however, is unlikely to have a significant impact on the already brimming global oil market, experts said.

James Williams of WTRG Economics said the United States would not have a lot of extra oil to sell. "This may help the producers get a higher price exporting it to Europe, where refineries are better attuned to light crude," he said.

Andy Lipow of Lipow Oil Associates argued that the benchmark US crude is too close in price to Brent, the London-traded European benchmark.

The narrow price gap "doesn't encourage exports from the US to many parts of the world" when transportation costs are factored in, Lipow said.