The US Oil Export Ban

The U.S. Energy Information Administration (EIA) yesterday added to the pressure on the US Government to remove the ban on crude oil exports. President Obama can remove the ban with an executive order. Speaker John Boehner has stated that legislative action will be considered in the Fall. Earlier Penley on Education and Energy had urged the removal of the export ban that originated with the 1975 Arab oil embargo and ensuing gasoline shortages in this country. Part of the reasoning for this blog’s support for the ban’s removal was the added foreign policy leverage that the US gains and the positive impact of its removal on the US economy.

The varying scenarios of the EIA report add additional support for the ban’s removal. The report confirmed the limited impact of the ban’s removal on domestic gasoline prices. It would leave US gasoline prices unchanged or slightly lower. The EIA report confirmed that the ban’s removal would produce downward, but limited pressure, on the global price of crude oil. US laws now allow for unlimited exports of the products from petroleum. Domestic crude oil can only be exported with a license, as is the case for Alaska’s North Slope oil and in certain cases with crude from California.

Yesterday’s release of the report from the EIA offered relatively complex analyses of the consequences of the ban’s removal based on various scenarios of oil price and production by 2025. Those scenarios included (a) the current reference price, (b) a low oil price, (c) high crude availability, and (d) high availability but a low price. The report confirmed that, under current, reference oil prices (Brent price of $90 per barrel in 2025) and under lower oil prices, domestic production would continue along current paths. With higher production versus the reference scenario, the Brent price is held to $88 per barrel by 2025. Domestic production has been rising steadily since 2010. It has now reached more than 9 million barrels per day, which was the production level in the mid 1970s.

The removal of the export ban does have the potential to add additional pressure to produce more crude domestically. Domestic production promotes US oil independence, as Penley on Education and Energy has previously observed. For some, this pressure is viewed negatively because of the non-traditional sources of the additional production. But we remain highly energy dependent. While renewables continue to grow, and this blog has documented their growth, renewables remain a small proportion of energy production and are insufficient to meet the demand for energy. We will continue to need fossil fuels for the foreseeable future. Of course, technological changes will alter supplies and availability of both fossil fuels and renewables and their growth paths. And, additional renewables are highly desirable as a means to stem the growth in carbon with its damaging impact on climate.

As part of a mix of energy policies, including ones that support renewables, there is now even more evidence that the export ban on crude oil should be lifted. It remains this blog’s recommendation that President Obama speedily do so by executive order.

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