WASHINGTON – Lawmakers pushing to repeal the 1970s-era ban on U.S. oil exports face a steep obstacle: The Obama administration sees no need to fully remove the restriction while the country is still importing part of its oil supply.
And many politicians are wary of a voter backlash if gasoline prices go up just as they open the door to exports.
However, Senator Lisa Murkowski, the Republican head of her chamber’s energy committee, is expected to introduce a bill as soon as Tuesday night that would lift the ban Congress passed in 1975 after the Arab oil embargo created fears of global shortages.
While there is plenty of resistance in Congress against lifting the ban, the prospects for a reversal could improve under some of the following conditions:
THE US OIL PRICE DROPS FURTHER
Mainly because of the U.S. oil glut, domestic crude producers now get about $6 a barrel less than companies in many other countries. If the glut grows and deepens the discount of West Texas Intermediate futures in New York to London’s Brent oil futures by between $10 and $15 a barrel or more, it would create a dislocation politicians would find hard to ignore.
“I am not sure that policy makers will act in advance of that problem developing,” said Jason Bordoff, a former energy advisor to President Barack Obama, now a founding director at Columbia University’s Center on Global Energy Policy.
“In response to that kind of market dislocation, people will feel very pressured to act.”
A RELATED HOUSE BILL PICKS UP STEAM
A bill introduced in February by Representative Joe Barton, a Texas Republican, has slowly gained backing and now has 26 co-sponsors in the 435 member chamber, including four Democrats. It could see a surge in support if more Representatives from non-energy producing states sign on.
One lawmaker to watch is Michigan’s Fred Upton, the chairman of the energy committee in the House. He is open to moving legislation on crude exports “when the time is ripe and it has the bipartisan support to succeed,” his spokeswoman said on Tuesday.
In the Senate, Murkowski’s efforts got a boost last month when Senator John McCain, a Republican from Arizona, which is not a big oil producer, declared support for lifting the ban. Murkowski still needs five Democrats in addition to North Dakota Senator Heidi Heitkamp, who supports the bill, to get the 60 votes likely required.
CONSUMER GROUPS GET ON BOARD
A string of reports from think tanks have concluded that allowing U.S. oil exports would cut the cost of gasoline because it would lower the price of Brent on which those prices are based.
If a major shipping company, or industry groups representing airlines or cruise ships, come out in favor of lifting the ban, it could sway policymakers into joining the fight.
OBAMA APPROVES EXPORTS TO MEXICO
The administration is expected to allow a swap of crude oil to Mexico, giving the country the same right to import U.S. oil as Canada. The move – a test drive for lifting the entire ban – could make politicians comfortable with the idea that exports will not harm profits at refineries or cause a spike in gas pump prices.
A GEOPOLITICAL CRISIS
A foreign policy crisis involving a large oil producer could push Washington into allowing more American crude to reach global markets to tame any price rises. Bob McNally, president of energy consultancy the Rapidan Group, said the crisis scenario is the most likely way the ban would be lifted before a new president takes office.
Otherwise, said McNally, the route to lifting the ban will depend on electing a president in 2016 who supports oil exports and will encourage Congress to do so.
Columbia’s Bordoff said a crisis could lend support, but steady pressure on Washington from Asia and Europe to relax the ban, even if there is no crisis, could also play a role.
(Reporting by Timothy Gardner.; Editing by Bruce Wallace and Andre Grenon)
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