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Photograph by Andrew Burton/Getty Images
Pumpjacks near Watford City, North Dakota
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It’s been simmering for more than a year, but the debate over whether to lift a nearly 40-year ban on U.S. crude oil exports kicked into high gear
this week with Republican lawmakers, big business leaders, and of
course oil lobbyists all calling it an outdated policy that needs to
end.
In what at least appeared to be a coordinated effort, Alaska Republican Senator Lisa Murkowski gave a speech on Tuesday morning at the Brookings Institution urging President Obama to end the ban and unleash America’s oil bonanza onto the world market. A few hours later, on the other side of downtown D.C. at the Newseum, Jack Gerard, president of the American Petroleum Institute, said roughly the same thing: The oil ban distorts markets, and given the surge in U.S. oil production, a protectionist measure put in place as a reaction to the Arab oil embargo of the 1970s is no longer practical. “It’s a new day,” said Gerard. “It’s a new time.”
Sitting in the audience on Tuesday afternoon listening to Gerard was Chamber of Commerce President and Chief Executive Tom Donohue. The next day, Donohue echoed these sentiments while speaking to reporters after delivering his annual state of American Business speech. “I want to lift the ban,” he said. “It’s going to happen.”
Murkowsi said she plans to introduce legislation this year to lift the ban. She also said she thinks the president has the legal authority to do it himself. Whether or not that’s the case, the fact that Obama hasn’t made more of an effort to lift the ban has less to do with whether he can than with whether he wants to. Just as the export ban has resulted in certain winners and losers, lifting it would do the same.
If the U.S. did start exporting lots of crude, the biggest winners would obviously be the oil companies that produce it. Keeping all that crude bottled up domestically has reduced prices. Since most of this new oil in the U.S. is being produced by horizontal drilling methods, which are much more expensive than conventional methods used in, say, Saudi Arabia., U.S. producers are worried that if oil prices at home get too low, drilling for it in such places as North Dakota will no longer be profitable.
With West Texas Intermediate prices having averaged $96 a barrel over the past 12 months, there’s still plenty of margin to keep domestic drilling profits strong. But as U.S. production continues to rise in the face of flat demand at home, it’s not hard for producers to start concocting nightmare scenarios in which they drill themselves into oblivion. That’s pretty much what their natural gas drilling counterparts did in 2012.
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