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Jan. 6, 2014

Retaining Ban on Crude Exports Good for Consumers, Climate

Statement by Tyson Slocum, Director, Public Citizen’s Energy Program

Note: On Tuesday, U.S. Sen. Lisa Murkowski (R-Alaska) is expected to make a speech urging the lifting of the crude export ban.

The oil industry, aided by pending shifts in Senate committee leadership portending a pro-oil tilt, is executing a full-court press to undo a 39-year-old consumer protection: a virtual ban on exporting U.S.-produced oil. It’s easy to understand why Big Oil wants to nullify the ban: doing so will lead to higher gasoline prices for U.S. motorists and fatter profits for oil producers. What’s unclear is why the Obama administration, specifically the energy secretary, supports ending the ban.

The export ban keeps more of America’s surging domestic production here at home, which keeps the purchase price of some domestic crude benchmark prices a tad lower for refiners that buy it to turn it into finished products. But overall, America’s booming oil production isn’t having a big factor on global prices, which is why gasoline prices during Obama’s oil boom have increased 54 percent since 2009. Global oil infrastructure makes it relatively easy to physically deliver the commodity in most parts of the planet, so there are generally prevailing universal benchmark prices. As a result, Wall Street traders price oil based on global trends, and right now they’re chasing Chinese demand rather than bulging U.S. production.

While the domestic glut isn’t moving global benchmark prices, it is keeping U.S. gasoline prices down a tad, as the excess capacity means it’s cheaper for U.S. refiners to access select U.S. landlocked crude. That’s why some refiners oppose lifting the crude ban; they’re making a fortune exploiting the export loophole. There are no restrictions on exporting refined petroleum products. That’s why we’re exporting three million barrels of refined petroleum every day, and a Public Citizen analysis shows that absent those refined exports, gasoline prices would be as much as 3.5 percent cheaper.

If the oil were to be exported without first refining it, we likely would see a higher rate of exports, and therefore a bigger price increase for American motorists.

Because lifting the ban would cause U.S. benchmark oil prices to rise, companies likely would have a greater incentive to increase production. With all of the increased production coming from controversial fracking techniques, lifting the ban not only would raise gasoline prices for U.S. families, but would create bigger environmental headaches.

As our current domestic oil boom painfully illustrates, America cannot produce its way to affordable gasoline, since the underlying commodity price is set by factors outside our borders. As long as our economy remains tethered to oil, we won’t be able to deliver affordable or sustainable energy for our families. Renewable energy, energy efficiency, the electrification of the transportation sector and investments in a sustainable energy infrastructure provide the only path for future prosperity. Keeping the crude oil export ban in place is an important first step.

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