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2014: Export of American Oil Is Contentious Industry Goal After 4-Decade Federal Ban

Lure of greater profits from global markets on collision course with national security goal of keeping supplies at home and protecting domestic gas prices.

Jan 6, 2014

Emboldened by the recent boom in U.S. crude production, oil company executives and others closed the year by launching a highly public push for the right to freely export U.S. crude oil. The move is a 180-degree change from 40 years of telling Americans that the country needs all the oil it can get to achieve energy independence and to protect consumers and the economy from oil and gasoline price shocks.

It's a particularly dicey appeal to make right now because the call for oil exports—and the industry's rationale for it—run counter to the arguments that oil companies and politicians are still using to justify a host of industry-backed initiatives, including the controversial Keystone XL pipeline project that would import oil from Canada.

What's more, for the American public, every discussion about oil policy ultimately boils down to one question: What would it do to gasoline prices? On that front, unrestricted oil exports would be a difficult sell. So far, the domestic oil boom has lowered the cost of U.S. crude and enriched the industry and nearby communities, but it's provided little relief to consumers at the pump. In the wake of that disappointment, export proponents would have to convince Americans that fuel costs won't be driven higher once homegrown oil starts flowing to the likes of Europe, Latin America and China—and that's an assurance no one can make.

Recent events make it clear, however, that the oil industry is undaunted.

Last month, Exxon Mobil Corp. joined Royal Dutch Shell and ConocoPhillips in publicly urging a repeal of the 1970s era federal law that strictly limits exports of domestic oil. "We are not dealing with an era of scarcity, we are dealing with an era of abundance," Exxon spokesman Ken Cohen told the Wall Street Journal, in arguing that the nation needs to "rethink" its restrictions on American oil shipments. 

Then, in a sign that the issue is gaining traction in Washington, Energy Secretary Ernest Moniz said at a conference that "there are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s." One of those issues, according to Moniz: The prohibition of most U.S. oil exports.

The nation's oil export restrictions are rooted primarily in legislation approved in the wake of the 1973 Arab oil embargo that halted Middle East imports and triggered long lines at gas stations nationwide. The repercussions were felt throughout the economy and galvanized Congress to create a federal oil reserve and to protect the U.S. oil supply by prohibiting almost all exports.

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Other effects of the embargo were just as enduring. A whole generation of consumers and politicians came away with a deep-seated fear of oil shortages, gas price spikes and an overreliance on Middle East and other foreign oil—a combination that has stoked the country's quest for energy independence ever since.

Daniel Yergin, author of the acclaimed oil book "The Prize," described the embargo-induced transformation this way: "The shortfall struck at fundamental beliefs in the endless abundance of resources, convictions so deeply rooted in the American character and experience that a large part of the public did not even know, up until October 1973, that the United States imported any oil at all."

Soon after, then-President Nixon declared: "Let us set as our national goal, in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy source."

It was an impossible task, and Nixon knew it. But for the next four decades, the goal would be repeatedly resurrected to steer the nation's oil policies. Nixon's bold pronouncement created a new reality, Yergin wrote, "Energy was now both a crisis and high politics."

The resulting export restrictions and regulations are not absolute, however. The Commerce Department's Bureau of Industry and Security (BIS) can grant export licenses for certain types of domestic oil on a case-by-case basis. Among those exportable crudes: oil from Alaska's Cook Inlet and North Slope, conventional heavy oil from California, and oil being sent to Canada for consumption there.

In addition, the BIS can approve other applications for export licenses if the shipments are deemed to be in the "national interest."

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