The top Republican on the Senate Energy Committee urged President Barack Obama to end a 39-year ban on exports of U.S. crude oil, joining what is shaping up as a major election-year debate over energy policy.
“We need to act before the crude oil export ban causes problems in the U.S. oil production, which will raise prices and therefore hurt American jobs,” Senator Lisa Murkowski of Alaska, top Republican on the Senate Energy and Natural Resources Committee, said today in remarks at the Brookings Institution in Washington.
Most exports of U.S. crude oil are prohibited under a 1975 law meant to counter surging gasoline prices after an Arab oil embargo. Advances in drilling techniques have led to increased production, and the Paris-based International Energy Agency projects that the U.S. will surpass Russia and Saudi Arabia as the world’s largest oil producer by 2015.
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Domestic oil production increased to 8.12 million barrels a day in the last full week of December, the most in 25 years, according to the U.S. Energy Information Administration. Output surpassed imports in October for the first time since 1995.
Murkowski spoke hours before Jack Gerard, president of the American Petroleum Institute, in a speech issued his own call to end the restrictions on exports. The separate comments signal a fight ahead on Capitol Hill over the export issue.
“The worst thing for the government to do is to distort the marketplace,” said Gerard, whose group lobbies on behalf of companies including Chevron Corp. (CVX:US) of San Ramon, California, and Exxon Mobil Corp. (XOM:US) of Irving, Texas. “It’s a new day. It’s a new time.”
Oil companies operating in the U.S. shouldn’t be bound by a policy set under the Arab oil embargo, especially with domestic production increasing, Gerard said in the speech.
According to a planning document obtained by Bloomberg News last year, API is developing a legal analysis to support more oil exports -- including potentially invoking World Trade Organization rules against restrictions.
Removing the prohibition would divide the oil industry, and push up the prices refiners pay for the crude, according to Valero Energy Corp. (VLO:US), the largest U.S. refiner by capacity, which opposes ending the restrictions.
“The current system has reduced American dependence on foreign oil, insulates consumers from some of the geopolitical issues that can cause price volatility and kept American refinery workers on the job,” Bill Day, a spokesman for the San Antonio-based operator of 13 refineries, said in an interview.
Energy Secretary Ernest Moniz said Dec. 12 that the foreign sales restrictions may be outdated.
“There are lot of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that looks nothing like the 1970s,” he said at an energy conference in New York.
White House spokesman Jay Carney today said he didn’t have a comment on Murkowski’s remarks and referred reporters to the U.S. Energy Department.
William Gibbons, an Energy Department spokesman, wasn’t immediately available for comment.
Murkowski, who vowed to introduce legislation in the absence of administration action, said she wants to settle the issue before a surge in production of lighter sweet crude in North Dakota’s Bakken shale creates a market imbalance. Many U.S. refineries are geared to processing a heavier grade of the oil.
The Center for American Progress, a Washington-based research group with ties to the Obama administration, faulted Murkowski’s proposal.
“Advocates for oil exports assume that domestic production will grow endlessly,” Daniel J. Weiss, the group’s director of climate strategy, said in a statement that noted forecasts for a peak in output in five years. “We are a long way from true energy security, and we should retain this domestically produced, strategic commodity until then.”
Democratic Senator Robert Menendez of New Jersey has said lifting the ban will increase gasoline prices for U.S. consumers as oil companies seek the highest prices, either at home or abroad.
“Crude oil that is produced in the U.S. should be used to lower prices here at home, not sent to the other side of the world,” he wrote in a Dec. 16 letter to Obama.
Murkowski rejected such claims. “If we want to bring down gasoline prices, we should be opening up federal lands to energy production, not closing them off,” she said.
She said Obama has the power to end the ban by declaring crude exports are in the national interest. The U.S. Commerce Department already has the authority to allow crude exports in certain circumstances while the prohibition remains in place.
“Lifting the ban will send a strong signal to the energy markets that as a nation we are serious -- we are serious as a country -- about our emerging role as a major hydrocarbon producer,” said Murkowski, who also called for an end to U.S. restrictions on condensate exports.
Murkowski also questioned whether the State Department is the proper U.S. agency to review TransCanada Corp. (TRP)’s proposed Keystone XL pipeline, which would transport Canadian oil sands to refineries on the Gulf of Mexico.
The U.S. has been considering an environmental study of the project for almost a year.
“The course of its review of the Keystone XL has been counterproductive and, frankly, I think it has unduly strained our relationship with Canada,” she said.
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