Q&A: Arguing the case for oil exports

HOUSTON — Most exports of U.S. crude have been banned since the 1970s, after an embargo by the Organization of the Petroleum Exporting Countries led to gasoline shortages.

Now that booming shale-oil production has helped shrink the U.S. trade deficit by reducing the need to import oil, industry lobbyists are pushing a new message in Washington: Sell some of the nation’s abundant supply of pricier light crude overseas.

U.S. refineries mostly are outfitted to handle heavy, high-sulfur crudes that come cheaper than the light crude producers have found at major shale plays. And the U.S. lacks pipeline infrastructure to transport oil from those plays to many domestic markets.

“So why not export the expensive stuff and import the cheap stuff?” said John Felmy, chief economist for the American Petroleum Institute, the oil industry’s top lobbying group

The idea to the lift the ban has drawn both interest and resistance in Congress, but midterm election politics may sour the congressional appetite to change the law this year.

In a recent interview with FuelFix, Felmy argued the industry’s case for dismantling the ban. Edited excerpts:

FuelFix: What’s the logic behind crude exports?

Felmy: We’re exporting a lot of products, and last year the total balance of trade for all items in the U.S. improved by something like $44 billion. How much do you think the balance of trade for oil improved by? $50 billion. So other products worsened in terms of balance of trade compared to oil. We feel strongly that the way things are going, in terms of shale development, that if you’re allowed to export, you’ll produce more.

FuelFix: How would oil exports affect the U.S. beyond the oil and gas industry?

Felmy If we produce our oil here — no matter whether it has a worldwide impact on prices or not — we’re paying ourselves. So take for example that $50 billion improvement in the trade deficit. Well, according to the U.S. Department of Commerce, for every $1 billion improvement in the trade deficit, it could mean 5,000 jobs. We had a $400 billion import deficit in oil last year. If you spent that money here, it could mean 2 million jobs here. Investing in pipes could generate another 1 million jobs. Basically, if we can export stuff that has higher value and import cheap stuff, on balance, the country benefits.

FuelFix: What’s the cheap stuff?

Felmy I’m thinking of heavy, high-sulfur crude from various parts of the world, like Mexico, Venezuela and Canada. We’ve spent billions of dollars for refiners to handle much less desirable crude oil. And some people still argue ‘Well, why doesn’t the U.S. invest more to refine the more expensive stuff?’ Well, that’s kind of counter-intuitive.

FuelFix: Why isn’t everyone on board?

Felmy: It dates back to the OPEC embargo. And while that may have led to some changes, it did not lead to the gas lines. It was price controls that did that. All the embargo did was swirl the oil around in the world: We didn’t buy from OPEC, but we bought from somebody else and they bought from OPEC. It’s a policy of the 1970s. It’s that memory that has people thinking it’s the same old world.

FuelFix: Other than that, how’s it going in Congress?

Felmy: We’ve got some people who are clearly willing to talk about it. And so we’re planning on educating folks. We have some people who are resistant to the idea. They want to export everything but energy. You don’t argue about exporting wheat or cars, what’s the difference with energy? And so we’re spending time with staff and Congress members if they’re available.