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US Ban on Oil Exports — An Overview

farkas, steven, manattIn 1975, the United States Congress passed the Energy Policy and Conservation Act (EPCA) to minimize the impact of future oil embargos by oil producing nations. The law grants the President authority to establish rules prohibiting the export of crude oil and natural gas, but also gives the President authority to grant exemptions to the ban under certain circumstances. Subsequent legislation, including the Mineral Leasing Act, the Naval Petroleum Reserve Production Act, the Outer Continental Shelf Lands Act and the Export Administration Act of 1979 (among others), provided further restrictions and exemptions to the ban.  All of this legislation was passed when the prevailing belief among lawmakers was that national security would be enhanced by limiting the foreign exports of crude oil and natural gas.

Since the ban was imposed, opponents of the law have tried, unsuccessfully, to have it lifted. Recently, efforts to repeal the ban have picked up steam as a result of increased domestic oil production, and political events overseas.  Proponents pushing to lift the ban on crude oil exports argue that the recent jump in domestic oil production from new fracking technologies makes the ban obsolete and unnecessary from a national security perspective.  An intense lobbying effort to lift the ban is currently underway despite the fact that the US continues to import approximately 7 million barrels of crude oil a day.

Independent Refiners Favor Keeping the Ban in Place

Those in favor of lifting the export ban believe that such a move will decrease the worldwide price of crude as a result of increased world supply. However, even the proponents admit that such a reduction in world prices will be contingent upon whether the Organization of the Petroleum Exporting Countries (OPEC) decides to maintain current production and not reduce oil production in order to uphold current pricing.   Such an admission suggests that lifting the ban could once again cause this nation to have its economic and national security at risk as result of actions taken by the same countries that caused the US to enact the crude oil embargo in the first place.

Opponents of lifting the ban believe that allowing exports will only benefit oil producers and will result in an increase in domestic crude oil prices.  In fact, some of the largest and most strident opponents of lifting the ban are independent refiners, big and small. Both Valero and Tesoro have publicly opposed lifting the ban, believing that domestic crude price increases will negatively impact refining margins for those independent refiners that purchase crude oil from oil producers.

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