With the stroke of a pen, President Barack Obama on Friday ended 40 years of U.S. crude oil export limits by signing off on a repeal passed by Congress earlier in the day.
The restrictions lift immediately under a provision in the spending and tax package that the president signed into law. Congressional leaders earlier in the week reached an agreement to end the trade restrictions, established during U.S. oil shortages in the 1970s, as part of a grand bargain that includes tax breaks for renewable-energy companies and refiners.
Repeal of the crude-export restrictions reverses four decades of a policy that has defined the nation’s relations with the rest of the world. Without the trade limits, the U.S. — now the world’s largest oil and gas producer — is free to export its crude, as it already does with refined products including gasoline. The U.S. Senate passed the bill with a vote of 65-33 after the House approved the measure 316-113 hours earlier.
Oil producers including ConocoPhillips and Continental Resources had lobbied in favor of repeal, which American Petroleum Institute President Jack Gerard described in a statement as “a historic moment in our energy renaissance.”
While the law allows these and other producers to ship their crude abroad, it may also lure investment to the U.S. from foreign oil companies that want to be able to export oil for consumption in their home countries, according to Scot Anderson, global head of the energy natural resources group at law firm Hogan Lovells in Denver.
“I would suspect that it would make foreign direct investment into the U.S. energy market more attractive,” he said in an interview. The firm represents producers, refiners and midstream companies.
Some independent refiners, such as PBF Energy, said they may be harmed by an end to the crude-export restrictions. The spending bill contains a tax deduction for those refiners to help blunt any negative effects of the new policy. House Democratic Leader Nancy Pelosi of California said that when Congress returns from its recess in January, she may seek to provide additional assistance to some mid-Atlantic refiners who could be excluded from the tax benefit.
“That’s some unfinished business that we have to do,” she said at a news conference after Friday’s vote.
Environmental groups including the Sierra Club opposed ending the crude-export limits, saying that any increase in oil output would exacerbate greenhouse gas emissions.
The bill is a “massive giveaway to Big Oil” while phasing out tax breaks for wind and solar producers, Senator Edward Markey, a Massachusetts Democrat, said in a statement.
Repeal may not provide an immediate boost to U.S. crude exports. A global oil-supply glut has pushed prices to their lowest levels in almost seven years. In addition, U.S. crude isn’t significantly cheaper than international grades at the moment. Transportation costs may make it uneconomic to ship the crude to refineries outside the U.S., according to analysts from groups including Energy Aspects Ltd. and Morgan Stanley.
U.S. oil exports are “not going to happen Monday, but within a week or two, you’re going to see contracts be developed and a system come into place,” said Texas Republican Rep. Joe Barton of Ennis, the House’s chief advocate for ending the export restrictions, in an interview Thursday.