WASHINGTON — Democratic Sen. Robert Menendez is warning the Obama administration not to give in to oil industry demands to lift a decades-old ban on crude exports.
In a letter to the president, Menendez, D-N.J., insists that easing the crude export ban would be “a win for Big Oil,” but would “hurt American consumers.”
“We must continue to keep domestically produced crude here to lower prices for consumers, while aggressively working towards clean and renewable alternatives,” Menendez said. “Allowing for expanded crude exports would serve only to enhance the profits of Big Oil and could force U.S. consumers to pay even more at the pump.”
Congress banned exports of crude in 1975, after the Arab oil embargo underscored the United States’ reliance on foreign energy supplies.
But oil industry leaders have begun campaigning for an end to the ban, and now Obama administration officials have signaled they are willing to study the issue. On the sidelines of the Platts Global Energy Outlook forum in New York last week, Energy Secretary Ernest Moniz noted the exports ban was born from an era of long gas lines and hefty oil imports — a situation far different than today, with the U.S. on track to produce 9.5 million barrels per day in 2016.
“There are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s,” Moniz told reporters.
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The ban ultimately is the domain of the Commerce Department, which historically has issued waivers allowing exports to Canada, as well as exports of oil produced in Alaska’s Cook Inlet and some heavy crude produced in California. There are other exceptions allowing for exports of crude stored in the Strategic Petroleum Reserve and oil that is transported through the Trans-Alaska Pipeline System.
In other cases, the Commerce Department’s Bureau of Industry and Security can issue licenses for oil exports if it deems them “consistent with the national interest.”
Lower gas prices
But oil industry leaders say the Canadian market isn’t big enough to keep light, sweet crude flowing from the Bakken and Eagle Ford formations, since most U.S. refiners are designed to handle dense, high-sulfur sour crude imported from other countries. By that logistical argument, oil industry leaders say allowing more exports could effectively help lower U.S. gasoline prices — helping to better align the nation’s crude production with the refiners that want it most.
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But Menendez doesn’t buy that argument. He notes that pipeline bottlenecks, Gulf Coast refiners’ demand for heavier oil and other factors have contributed to a disconnect between oil’s domestic and global prices The Brent crude price, the global benchmark, is now about $110 per barrel while West Texas Intermediate, the U.S. benchmark, now trades at around $97.
“Why would we want to export oil and raise American oil prices to match the world’s oil price?” Menendez asked. “Big Oil clearly wants to pad their record profits and fetch a higher price for their oil. I believe we should be more worried about the bottom line for American families.”
“Crude oil that is produced in the U.S. should be used to lower prices here at home,” Menendez added, “not sent to the other side of the world.”
Lawmakers are starting to look at the issue, but any moves to upend the crude export ban on Capitol Hill face long odds. Even with the surge in domestic oil production — putting the U.S. on track to be the top producer globally — it may be hard for some lawmakers to justify selling that crude overseas after decades touting the importance of American energy security and independence.
Last month, ConocoPhillips CEO Ryan Lance acknowledged the tough political challenge, saying it would be “a pretty hard climb in D.C.”
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