Sunday, August 9, 2015

Getting’ Crude

Under existing law, oil extractors in the United States are prohibited from exporting their crude oil. Why? “In response to the 1973 Arab Oil Embargo, Congress banned the export of crude oil produced in the United States. From time to time there have been exceptions, but for the most part the ban has been a strict prohibition on the export of crude oil. For the producers this has meant selling their crude oil production domestically for less than it would be worth on the world market. Of course, independent refiners have for decades enjoyed making money on the price spread between the price of U.S. crude oil and the much higher market price in the U.S. and abroad for their refined products. With the oil boom in full swing, the major oil producers are now pushing Congress for repeal, but there is a political problem.” Motley Fool, March 31, 2014. And that political problem is what this blog is all about.
The above oil embargo had folks lining up at the pump, and the right to fill up was determined by the last digit of your license plate. America began its long debate on how to reduce its dependence on “foreign oil.” As fracking technology exploded, American oil producing in recent years has risen to a level that is closing on Saudi Arabia’s industry. Local American refiners were having a field day. With crude not allowed to leave the United States, all that domestic production had to be refined here. And there is no ban on the export of refined oil. But oil producers, particularly in an era of depressed oil prices, have been putting pressure on Congress to lift that export ban, allowing American oil to be sold internationally to the highest bidder.
As the sanctions on Iran may be lifted (assuming compliance with nuclear restriction in the treaty being considered by Congress and the Iranian government), American oil extractors are screaming that they should be no worse off than international bad-boy, Iran, which may  well be free to sell its petroleum products lawfully into the global marketplace. And a GOP-led Congress, perhaps with a president willing to make a concession to get other legislation passed, might just lift that ban.
Why is there even a debate? Aside from the fact that American refinery owners don’t want American oil to be shipped to non-U.S. refineries, there are economic consequences for all of us that are on the table. Although the addition of legal Iranian oil to the global marketplace may increase supply – unless other oil producing nations cut back, but more oil adds a downward pressure on prices – the battles on this issue will very much impact the price American consumers pay at the pump.
The House and Senate are working on bills that would lift the ban, which began in the 1970s energy crisis and Arab oil embargo and which many lawmakers — and some members of the Obama administration — feel is now outdated…The idea does not sit particularly well with refiners, who argue that such exports would take refining jobs out of the United States and lead to higher prices at the pump. Supporters of lifting the ban argue that new American exports would add to the global supply of oil and help lower international prices.
“The old debate may have been given wings by the administration’s desire to lift sanctions on Iran. ‘If the administration wants to lift the ban for Iran, certainly the United States should not be the only country left in the world with such a ban in place,’ Speaker John A. Boehner said on Wednesday, noting that the House would finish its bill in the fall… It is an argument that has also been made by Senator Lisa Murkowski, Republican of Alaska and chairwoman of the Senate Energy and Natural Resources Committee, which is working hard to get a bill out of its committee room before the August recess.” The Washington Post, July 30th.
We have ideological factors – that free market thang (and we are anything but a free market with all the governmental regulatory, subsidies and tax breaks given to special interests) – fighting consumer interests. It’s a hot debate, pitting various factions of the petroleum industry against each other, although it is looking increasingly as if the “free market” forces are likely to prevail. Do you have an opinion?
I’m Peter Dekom, and someone always has to pay for change, one way or the other.

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