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US oil export ban is 'sanction against ourselves': Murkowski

Sen. Lisa Murkowski of Alaska plans to offer energy legislation this year that would lift the ban on U.S. oil exports, in place since the 1970s.

"If the U.S. intends to lift sanctions on Iranian oil, restrictions should be lifted on U.S. oil," Murkowski, a Republican who chairs the Senate Energy and Natural Resources Committee, said at the IHS CERAWeek conference on Monday in Houston.

She said that with the Obama administration's deal on Iran's nuclear program, 1 million barrels a day of Iranian crude would ultimately be back on the market. "This equates to a sanctions regime against ourselves," she said. "It is time to lift America's ban on oil exports," Murkowski, who also calls for more drilling on federal land, said. "This year should be the year of legislation," she said.

An oil tanker ship is shown moored at the loading bay of an oil refinery in Houston.
Keith Wood | The Image Bank | Getty Images
An oil tanker ship is shown moored at the loading bay of an oil refinery in Houston.

As oil prices plummeted, the calls to export U.S. crude have grown louder.

"I believe in some fashion it's going to happen," said Daniel Yergin, vice chairman of IHS in a recent interview.

Lifting the export ban has been discussed by the oil and gas industry as U.S. oil production has grown in recent years, but the oil price crash has provided a critical reason for proponents of crude oil exports.

"What has changed is for the health of the production industry, it's more important than ever," said Blake Eskew, vice president of oil markets and downstream, IHS Energy Insight. "The degree of certainty companies need to invest in the current environment has been diminished by price volatility."

"If the U.S. intends to lift sanctions on Iranian oil, restrictions should be lifted on U.S. oil. This equates to a sanctions regime against ourselves." -Senator Lisa Murkowski (R-Alaska), Chair of Senate Energy and Natural Resources Committee

The industry has argued that by allowing the industry to export the light sweet crude abundant in the U.S., producers could command higher prices and a steady market for their product. That would then help the industry maintain higher production levels.

In recent testimony in front of Murkowski's Senate committee, ConocoPhillips' CEO, Ryan Lance, said it would make sense if the light oil output from unconventional wells in the U.S. were exported as it cannot be refined in many U.S. refineries. The U.S. could then continue to import heavier crude, which can be refined all along the Gulf Coast. The U.S. produces about 9.3 million barrels a day and imports about 7 million barrels.

"Repealing the crude oil export ban is vital to the health of the domestic E&P business and will incentivize ongoing investment by industry," Lance told the Senate energy panel recently. "By removing obstacles to investment, we can help protect jobs in this current low-price environment and create significant numbers of new jobs in the future." He appeared with Murkowski on the IHS CERAWeek panel Monday.

Oil-producing regions that would benefit most from exports would be the mid-section of the country, such as the Bakken region of North Dakota, Eskew said.

Eskew said the price gap between U.S. oil and international oil would narrow, but that the advantage to U.S. producers would be the ability to bring more production on line, basically capping price increases. The spread between U.S. West Texas Intermediate oil futures and Brent, the international benchmark, was about $7 Monday.

"If we had unfettered exports of crude oil then one would export the Brent-WTI spread would narrow and the U.S. refiners would lose some their raw material cost advantage," said Andrew Lipow, president of Lipow Oil Associates.

The refining industry is at the heart of the debate. Currently, the U.S. refining industry is more able to process heavy crudes, like those from Saudi Arabia, then the lighter sweet crudes produced in the Bakken region of North Dakota and elsewhere. The big refineries on the Gulf Coast, which process heavy crude, are also exporters of refined product, such as diesel and gasoline.

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"In Texas and Oklahoma and Alaska, where the oil is being produced, people want to see the export market open, but for politicians in places like the East Coast, it's only downside if they lift the ban and prices rise," Lipow said.

Murkowski said at the conference that more legislators still need to understand that lifting the ban would mean more U.S. oil on the market and cheaper prices for consumers.

Lipow said he does not expect the ban to be lifted, but more re-exporting of Canadian crude might take place as well as more exports of condensate, a lightly refined product approved for export. The U.S. has recently allowed companies to export condensates or lightly refined oil. Crude oil exports totaled 503,000 barrels a day last week, according to the Energy Information Administration.

Lipow does not believe repealing the export ban would provide relief at the pump. "It would not impact gasoline prices because they are already connected to the rest of the world," he said. "We're importing about 500,000 barrels a day into the East Coast, and we're exporting about 500,000 barrels a day off the Gulf Coast. So we're all linked to the world market on gasoline and diesel already."