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Washington Post: End ban on crude oil exports

The Washington Post

First Published Aug 07 2014 12:34 pm • Last Updated Aug 07 2014 05:20 pm

The United States is a rising oil exporter. That sentence is amazing when you consider that federal law technically bans crude oil exports.

Last week, the BW Zambesi oil tanker left Texas City, Texas, with $40 million worth of minimally processed condensate, a form of oil, and headed to South Korea. This was the first shipment following a Commerce Department determination that decades-old federal restrictions on crude oil exports do not apply to condensate from which drillers have removed various natural compounds. That stuff, regulators said, falls under an exception to the export ban that allows the shipping of oil that has been processed. This policy change may clear the way for more U.S. crude exports. While polls show Americans are worried about that prospect, it actually is an unambiguous win for the country. If anything, the rules should get less restrictive.

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The case against U.S. oil exports seems simple and obvious: Why allow them when the country still imports some crude? The answer is slightly more complicated. The U.S. has become an energy powerhouse, with crude oil production leaping some 48 percent in the last few years. New technology is tapping oil-bearing shale formations in states such as North Dakota and Texas. Most of this product is light oil, which does not require heavy refining. Some of the most advanced refineries in the world are along the Gulf Coast, but that’s actually a problem: Their owners invested in expensive facilities suited to refining heavier crude, so there is a mismatch between the refining infrastructure and the type of crude flowing from U.S. wells. In the deeply interconnected global oil market, in which borders matter less than many people think, the obvious solution is to allow oil companies to ship the light crude to refineries suited for processing it, supporting U.S. profits and U.S. jobs in the process, and to tolerate imports of crude oil that U.S. refineries can handle.

But what about energy security? The Council on Foreign Relations’s Blake Clayton points out that expanded exports would encourage the development of oil fields and transport infrastructure, which would help the country weather some disruption in the global oil trade. Then there is the question of what lifting the ban would mean for domestic gasoline prices. This embarrassing debate discredits the Obama administration as it lectures other nations about irrational government barriers and supports in the fossil fuels business, which skew consumption habits and reduce the resilience of the world oil market on which everyone depends.

The export ban was a desperate ploy in the 1970s to control commodities markets amid spikes in oil prices induced by the Organization of the Petroleum Exporting Countries. Keeping it in place now is an economically incoherent policy, particularly when removing it would encourage an industry that is transforming the fortunes of large swaths of the nation. Congress should lift the ban entirely. Until then, Commerce should allow as much oil as it can to flow through the ban’s exceptions.




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