America to Lift Oil Export Ban Under Budget Deal

Lifting the ban is unlikely to affect prices but would be of strategic significance to the United States.

A helicopter flies over the Houston Ship Channel, Texas, February 11, 2010
A helicopter flies over the Houston Ship Channel, Texas, February 11, 2010 (Louis Vest)

The United States could end a forty-year ban on oil exports as part of a budget deal that senior Democrats and Republicans said on Wednesday they expect to pass despite criticism from environmentalists as well as hardline conservatives.

Republicans, who have a majority in both chambers of Congress, have long called for repeal of a ban that was imposed in 1975 following an embargo from petroleum-exporting countries in the Middle East.

America has become largely self-sufficient in recent years, largely thanks to technological advances like hydraulic fracturing, or fracking, that allow companies to drill for oil that could previously not be reached.

Given the abundance of oil on the market, lifting the ban is unlikely to have a big impact on prices.

The price of a barrel of American crude fell below $40 on Wednesday, reaching its lowest point since the 2008 economic crisis.

Strategic concerns

With Saudi Arabia, the world’s swing oil producer, keeping output unchanged for political purposes and Iranian oil expected to hit the market as a result of the nuclear deal world powers reached with the Islamic country in July that gradually lifts sanctions on its economy, few analysts expect the price of oil to rise any time soon.

But removing the ban would allow American companies to open new markets in Asia and Europe and reduce allies’ dependence on imports from the Middle East and Russia.

It could also help assuage the concerns of countries like India and Japan, which rely more on Iranian oil than others, in case the United States want to reimpose sanctions on Iran if it violates the term of the nuclear agreement.

Complaints from both sides

Environmentalists oppose the change in policy, arguing that it will only encourage more drilling.

Democrats, more in tune with green demands than pro-business Republicans, insisted on extending tax credits for solar and wind energy at the same time as the oil ban is lifted.

On the right, fiscal hawks are disappointed that the spending bill does not include deeper budget cuts, nor denies funding to Planned Parenthood, a health group that provides abortions.

Yet leaders in both parties expected the measures — which would keep the government funded through September 2016 — to pass. President Barack Obama has indicated he will sign the package into law.