Professor Allen Springer Explains Lifting of US Oil Export Ban

allen-springer-bowdoinThis year saw the resumption of US oil exports with American crude now flowing to virtually every corner of the market, and according to Bloomberg news, “re-shaping the worlds’ energy market.” But why was the ban, which had been in place for 40 years, lifted? Why was it imposed in the first place? And what are the political implications of the move?

Professor of Government Allen Springer put the 1975 ban down to dual concerns of scarcity and cost. “The scarcity concerns were triggered by the A-OPEC oil embargo,” he said, referring to the action taken by the Arab members of the Organization of Petroleum Exporting Countries. They wanted to punish Washington for its support of Israel during the 1973 Arab-Israeli war.

“There were long lines at the gas pumps and people were worried about access to oil,” said Springer, who among other things teaches courses in international law, environmental policy, and United States foreign policy. In one month in 1974, he explained, the price of crude oil soared from $21 to $51 per barrel, “so more efforts to keep oil at home seemed like a good idea on all fronts. This was also a time when we imposed the 55 mile an hour speed limit and set up the strategic petroleum reserve, so the export ban was part of a broad package to try to reduce American oil insecurity abroad.”

So why did Congress vote to lift the ban last year? (Action which came into effect December 31, 2015.) Springer admitted it may sound curious given the Obama Administration’s stated commitment to clean energy policies and reducing carbon emissions, but it effectively comes down to political deal-making.

“Lifting the oil export ban was initially opposed by the administration and pushed hard by Republicans like Alaska Senator Lisa Murkowski.” Springer said the proposal took a while to garner any Democratic support: “The fact is that it was done as part of an overall spending bill for Congress to pass in order to avoid having another debate on the budget before the election.”

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Springer said some Democrats were persuaded to support the measure once a provision was added to the legislation that tied in extended tax credits for clean energy projects. “That allowed some Democrats to support lifting the ban. And so a deal was cut that was effectively a political deal as much as anything else.” It also happened at a time when people were aware of just how much oil was being produced in the US, said Springer, and of how much the cost of gasoline was going down. “This seemed like a good time to end the export ban, if ever there was one.” Nevertheless, he added, not everyone was happy with the deal, which many environmental advocates found hard to stomach, tax breaks or no tax breaks.

crude oil pipes

Crude Oil Pipes near Freeport, TX. Photo: Department of Energy

Springer was keen to stress that the resumption of US crude exports does not signal a global abundance of oil, nor does it mean that cheap oil, and therefore cheap gasoline, will continue indefinitely.

“We’ve seen a slight rebound in oil prices recently although they are still much lower than a year ago. A lot of that is speculation of course,” said Springer, which means it’s hard to predict where the price is going. He cited one study, carried out by the environmental non-profit research group Resources for the Future.

“This suggested gasoline prices may go down further as a result of increased exports because this would create a more even world market price that, depending on how refineries respond, might actually reduce gas prices in the US between 1 and 5 cents a gallon. But I’ve seen other arguments in the opposite direction.” Springer said a lot depends on the refineries and how they change the mix of products they refine.

“It’s similarly hard to gauge what the political implications will be for the US on the world stage,” said Springer. America is not exporting huge volumes of crude compared to big players like Saudi Arabia and Russia, “but American oil is now part of the international energy mix and there are those who feel this will give the US more influence. However it’s not the kind of supply that the US can control through state-owned oil companies, like some other countries can. So how Washington could use this as a policy tool isn’t terribly clear to me.”

In conclusion, said Springer, while ending the oil export ban was undoubtedly a major development, it’s too soon to gauge what the long-term political and economic effects, if any, will be.

 

 

 

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