Whatever Shall We Do with All this Extra Oil? Oil companies want the crude-export ban lifted. Is that a good idea?

Repost from onEarth, Natural Resources Defense Council

Whatever Shall We Do with All this Extra Oil?

Oil companies want the crude-export ban lifted. Is that a good idea?
By Brian Palmer | December 13, 2014

If oil industry lobbyists didn’t have so much money, Congress would get pretty sick of them. They’re constantly whining. They don’t like the carbon pollution rules. Fuel-economy standards are too tight. Something about a pipeline from Canada. Today, they’re back on Capitol Hill moaning about the crude-export ban.

What’s that you say? You’ve never even heard of the crude-export ban? Well, now you have, and I’ve compiled a few FAQs for you.

What does the ban say?

The short answer: Crude oil drilled in the United States must be refined in the country. But as with most laws, there are exceptions. Companies can export oil to be refined in Canada as long as the products are sold there or back to the States. Some Alaskan crude has been exported. And a particular kind of heavy crude from California can be sent abroad because presidents George H.W. Bush and Bill Clinton decided it was in the national interest. Such exceptions can be significant: Total exports peaked at 104 million barrels in 1980, representing about 3 percent of total U.S. extraction that year. In recent years, though, that number has fallen below 50 million barrels.

That law’s been around since the 1970s. What’s the big deal now?

Well, we’re talking about an industry in which greed is considered good. Money, of course! Until recently, energy companies weren’t drilling enough oil to make a big splash on the international market. But U.S. production surged by nearly 50 percent between 2008 and 2013, and those CEOs now think they can take home even bigger bonuses if they’re allowed to sell abroad.

Why was it created in the first place?

Basically because the Arab members of the Organization of Petroleum Exporting Countries got mad that the United States and a few other countries were siding with Israel during the 1973 Arab-Israeli War—and cut production and banned petroleum exports to those nations. The price of crude quadrupled, causing a five-month-long oil crisis that majorly disrupted global commerce and American lives. Since then, energy independence has been a goal for every U.S. president; Gerald Ford, for example, signed the 1975 Energy Policy and Conservation Act, which prohibited most crude exports and established a national strategic oil reserve.

Will I pay more for gas either way?

The ban certainly depresses the price of U.S.-produced crude oil, but gas prices involve a lot of factors. Energy analysts and industry advocates have debated the ban’s effects for years. So, in an attempt to settle the argument, the somewhat more impartial U.S. Energy Information Administration recently published a report on what would happen to gas prices if exports were allowed. You can read it here if you’re an oil-price wonk. Here’s the short version, from the organization’s administrator, Adam Sieminski: “[I]t probably wouldn’t do a great deal one way or the other with gasoline prices.”

Apparently, when it comes to economics, the controversy has more to do with profits than your family budget.

What would it mean for the climate if we allowed the exports?

It might be bad news. In an era of high domestic production, the ban holds down the price of West Texas Intermediate, North America’s benchmark crude, which then keeps Canada’s tar sands crude prices low. (The price points of the two crudes move roughly in sync.) So if Congress lifts the ban, the tar sands industry, which is currently in a major funk, could be saved—and this would mean a lot more extraction of the most carbon-intensive fossil fuel source around.

That’s the theory. And a March study from Oil Change International supports it: The report concluded that allowing exports would result in added carbon emissions equivalent to the output of 42 coal plants. The factors influencing global oil prices are complex, though, so it’s difficult to say exactly how much fossil fuel the crude-export ban is keeping in the ground.

The lack of certainty, however, makes its own point. Before Congress even considers repealing a 39-year-old law dealing directly with fossil fuels, it ought to understand the implications for climate change. It’s appalling that politicians would consider lifting the ban without full information. But I guess they’re not scientists.