WASHINGTON — The Obama administration should immediately end an “antiquated” ban on exporting U.S. crude, Sen. Lisa Murkowski of Alaska said Tuesday.
Otherwise, Murkowski warned, the U.S. soon could be confronted with supply disruptions and price increases tied to the growing mismatch between Gulf Coast refineries geared toward processing heavy crudes and the light, sweet oil flowing out of American fields.
“There will come a time when we will have an unsustainable glut of this light crude,” Murkowski predicted in a speech at the Brookings Institution. “Failing to renovate the crude oil export architecture could very well lead to disruptions in supply and production.”
Tough choices: U.S. oil glut stirs up political dilemma
A Republican from Alaska, Murkowski is the top GOP member on the Senate Energy and Natural Resources Committee. Her speech — and the release of a white paper on the topic — effectively launches the Capitol Hill debate over crude exports, following related comments by Energy Secretary Ernest Moniz, major oil company executives and newspaper editorial boards.
Imposed after the oil embargo in 1975, the existing ban already permits waivers for crude exports that are in the “national interest.” Existing exceptions allow exports to Canada as well as foreign sales of oil produced in Alaska’s Cook Inlet, some heavy crude produced in California and oil transported through the Trans-Alaska Pipeline System.
But those limitations don’t match today’s energy reality, Murkowski said, noting the oil and gas now flowing out of hydraulically fractured wells in North Dakota, Texas, Pennsylvania and other states.
“The rules of engagement on energy trade were written long ago for a now bygone world in which scarcity, not abundance, was the prevailing mindset,” Murkowski said. “We must modernize the regulations that govern energy exports, demonstrating to the world that we are committed to leading on issues of energy, the environment and trade.”
Although Congress could address the issue through legislation, the odds of that are slim in an election year when politics could ensnare even relatively noncontroversial bills.
But the Obama administration can do plenty on its own, perhaps by declaring it in the national interest to end the ban. Another option: The Commerce Department could approve an export application under a provision allowing foreign oil sales if the fuels “cannot reasonably be marketed” here in the United States. Murkowski said the mismatch between the nation’s refining capacity and the grade of oil being produced domestically should qualify.
There also is the specter of action on the world stage, if another country challenges the U.S. crude exports ban as a violation of World Trade Organization rules.
Critics warn against loosening export restrictions amid today’s surging oil production — given questions about the longevity of today’s boom.
The Energy Information Administration predicts that U.S. oil production will peak within five years before beginning a long, slow decline.
Daniel J. Weiss, director of climate strategy at the Center for American Progress, said that shows “we are a long way from true energy security.”
“We should retain this domestically produced, strategic commodity until then,” he said. “Allowing oil exports now would be like celebrating a victory at half time.”
And Sen. Ed Markey, D-Mass., said U.S. consumers would be squeezed by increased oil exports.
“Exporting American crude oil would hurt American consumers, businesses, and play right into the hands of OPEC nations,” Markey said. “The American people want our American resources to stay here to benefit our industries, our families, and our security, not sent to China and other competitors.”
Stephen Kretzmann, executive director of Oil Change International, which released its own report arguing against exports last year, said more overseas sales would “immediately raise the price of oil in North America, raise profits for Big Oil and . . . increase dangerous drilling in our backyards.”
But Murkowski flatly dismissed the idea that exports could send domestic prices higher. If the ban is lifted, U.S. refineries could continue processing lower-quality heavy crude from Canada and other countries while American companies produce more higher-grade, lower-sulfur domestic oil for export — an equation that Murkowski said would “put downward pressure on international prices.”
“All things equal, the combination will help the American consumer,” she said.
Murkowski insisted that the time to act is now — before the U.S. is producing more light sweet oil than its refineries can process.
“We may see this mismatch more apparent . . . in the not-too-distant future,” she said. “I don’t want us to be sitting around and waiting until such time as things really do get out of balance, because then it is more difficult to jump in and make those adjustments. We ought to be looking at it now.”