Congress To Lift Four Decade Oil Export Ban: Will It Impact Crude Prices?

A little logrolling is better than brinksmanship and legislative gridlock we suppose and thanks to GOP concessions on tax credits for wind and solar as well as a three year reauthorization of a conservation fund, Republicans were able to include a measure that lifts the 40-year old ban on crude exports in a package of spending and tax legislation that funds the government until September of 2016. 

As Bloomberg reports, “House Speaker Paul Ryan told fellow Republicans in a closed-door meeting Tuesday night in Washington that leaders had reached a deal pairing a $1.1 trillion spending bill with a separate measure to revive a series of expired tax breaks.” 

“I think we’ve been pretty clear we’re not going to have a shutdown,” Ryan said on Tuesday, tacitly acknowledging the reputational damage the party suffered in 2013 when bickering over Obamacare brought the government to a virtual standstill. “That’s the way I think Congress ought to run,” he added. “Let’s get back to legislators legislating. Let’s get back to actually doing things methodically, deliberating. We call this regular order around here — I call it democracy.”

(Yes. Paul wants more of that.)

Foreign sales of refined products (like gasoline) were allowed under the ban - in place since 1975 after the Arab oil embargo - and as WSJ notes, “a certain type of light oil is also already starting to flow overseas thanks to permission granted in 2014 by the Commerce Department, which allows producers to reclassify a certain type of oil as a refined fuel, similar to gasoline, which is legal to ship abroad.” Exports to Canada (which is exempt from the ban) have increased ninefold to 400,000 b/d since 2008.

The inexorable decline in crude prices served as the impetus for reviving the debate around the export ban. As The Journal goes on to recount, “a dramatic drop in oil prices, hovering below $40 a barrel, helped prompt lawmakers of both parties to consider pairing renewable energy support with oil exports, a type of grand Washington deal-making that hasn't been seen for years on the highly divisive issues of energy and environment.”

1 2 3
View single page >> |

Copyright ©2009-2015 Media, LTD; All Rights Reserved. Zero Hedge is intended for Mature Audiences. Familiarize yourself with our legal and use policies every time you engage ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Dennis U. Atuanya 4 years ago Contributor's comment

Energy issues in the United States legislature are very emotive and almost always divisive. This deal however will most likely be of little effect in the near term. First because in addition to arbitrage issues, U.S. crude grades will be competing with well-established ones of similar grade (e.g. Bonny Light, Qua Iboe Light which sell at premiums to international benchmark Brent). Secondly, in a low oil price regime, the U.S. producers may be unable to offer refiners the necessary price discounts to enable them come on board quickly.