Oil Producers Push to Export U.S. Crude Even as Prices Drop

Producers are confident of long-term demand and believe that new markets will eventually offer big profits

By HENRY C. JACKSON, Associated Press

WASHINGTON — Dropping oil prices aren’t slowing a push from U.S. producers to ship their crude oil overseas and change a decades-long ban on exports.

The cost incentive may not be obvious, with oil prices are as low as they’ve been since 2009 and with some analysts predicting they’ll drop further. But oil producers are confident of long-term demand and believe that new markets will eventually offer big profits.

Backers see a changing landscape that includes a Congress controlled by Republicans generally viewed as more receptive to oil exports, and some signs the Obama administration will consider modifications to the longstanding policy that bans exports of raw crude.

The ban is a relic of the 1970s, after an OPEC oil embargo led to fuel rationing, high prices and iconic images of long lines of cars waiting to fuel up.

Supporters of exports, like the American Petroleum Institute, the oil industry’s top lobbying arm, say those days are long gone. The group is running TV ads highlighting the growth of the U.S. shale oil industry as evidence that there’s enough oil for both domestic and overseas markets. The organization lists overturning the ban as its top priority for 2015.

Jack Gerard, the organization’s president, said the policy is the result of “a politically motivated disconnect between today’s much-changed energy landscape and the political orthodoxy of some who continue to push for arbitrary and unfair limits or an outright ban.”

Besides the financial incentive, Gerard and supporters argue that lifting the ban would help control prices for consumers and give the U.S. a stronger hand in foreign policy.

Opponents make the opposite case: Exporting oil now would result in higher gas prices, they say, and prevent the U.S. from achieving a goal of energy independence. Those opposed to a change in policy include many domestic oil refiners, which stand to lose business if crude oil is exported.

“The oil markets and the markets for various petroleum products are extremely complicated, and I think that to mess with this upsets the equilibrium that’s there,” said Jay Hauck, executive director of Consumers and Refiners United for Domestic Energy, or CRUDE, which represents a group of oil refiners.

Hauck said the policy shouldn’t change while the U.S. continues to import great quantities of oil.

The U.S. imported 9.9 million barrels of oil per day in 2013, from some 80 countries, according to the U.S. Energy Information Administration.

Simply increasing U.S. production to eliminate imports is not that simple, though. Different types of oil have different uses, and U.S. production is predominantly lighter, so-called sweet crude oil.

Many U.S. refineries are equipped to handle heavier crude produced by countries like Mexico and Canada. Producers argue that shipping to countries in Europe and Asia, where refineries are equipped to handle lighter oil more efficiently, makes economic sense until more U.S. refineries can efficiently process lighter oil.

“The reason for allowing exports is primarily that not all oil is the same,” the Aspen Institute, which backs abolishing the ban, argued in a 2014 report.

But even some supporters say it is too early to push for an up or down vote to resume exports.

Sen. Ted Cruz, R-Texas, proposed an amendment that would link abandoning the ban with passage of legislation allowing the Canada-to-Texas Keystone XL oil pipeline to move forward. Soon afterward, two supporters of lifting the ban — Texas Sen. John Cornyn, the Senate’s No. 2 Republican, and Sen. John Hoeven, R-N.D. — said the amendment might be too much, too soon.

Cornyn and Sen. John Barrasso, of Wyoming and Lisa Murkowski, chairwoman of the Senate Energy and Commerce Committee, are among those interested in overturning the ban in the long run. Sen. Heidi Heitkamp, D-N.D., whose state is the nation’s second leading oil producer, shares their position.

Still, dozens of members of Congress have not taken a public stance on the oil exporting issue. House Energy and Commerce Committee Chairman Fred Upton, R-Mich., has said the policy should be examined, but he stopped short of pushing for legislation.

Other House members, however, have pushed for a vote: Rep. Joe Barton, R-Texas, plans to re-introduce legislation to lift the ban.

The Obama administration has made some recent adjustments on oil exports.

Last year, it allowed increased exports of so-called condensate, a lightly refined, lighter form of crude. Administration officials, including Energy Secretary Ernest Moniz, have said overall policy at least needs to be examined, though no action is pending.

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