Abbott Signs Call to Lift Crude Oil Export Ban

Texas has officially asked Congress to lift its 40-year-old ban on crude oil exports.

Gov. Greg Abbott on Friday signed a resolution calling the federal ban a “relic from an era of scarcity and flawed price control policies” that should be lifted at a time when the country is awash in low-priced crude. A trio of Texans in Congress is pushing legislation that would overturn the ban.

Supporters of lifting the ban – including virtually all Texas lawmakers and industry regulators – argue that finding more buyers for U.S. crude would prompt more drilling, pouring more cash into the state treasury. Proponents of the status quo fear that a repeal could increase gas prices and spur more drilling that harms the environment.

American companies may export refined petroleum products such as gasoline or diesel, but most crude here is stuck at home.

That’s due to a policy dating back to the mid-1970s, when the U.S. produced far less oil and the 1973 Arab oil embargo caused global oil prices to skyrocket. In 1975, President Gerald Ford signed the Energy Policy and Conservation Act, which banned crude oil exports with few exceptions — an effort to keep oil here and protect against price shocks.

Since then, the U.S. — led by Texas — has become the world’s top oil producer, largely due to technological advances like hydraulic fracturing that allow operators to tap resources once considered unreachable. But that surge of production is filling up the country’s pipelines and storage tanks, driving down U.S. prices and slowing drilling across the country, with big implications for the Texas economy.

Hovering around $60 a barrel in recent days, crude prices are up from lows around $45 in late January but remain far below the $100-plus levels seen last summer.   

Supporters of lifting the ban say the move would bring U.S. prices more in line with international prices, softening the blow of the drilling downturn.

Critics argue that shipping U.S. crude overseas would threaten the country’s energy security and raise gasoline prices. 

It’s unclear how the change would affect prices at the pump or ripple through other sectors of the economy. 

In an October 2014 report, the federal Energy Information Administration concluded that gasoline prices at the pump are more closely linked to global crude prices than the value of U.S. oil. The market research firm IHS agrees, estimating that exports could actually lower gas prices over time.

Some refiners have opposed lifting the ban, fearing they would lose their discount on domestic crude.

The Brookings Institution, a left-of-center think tank, projected in September that a repeal could increase the country's GDP by $550 billion to $1.8 trillion over the next 25 years. But it also states that lifting the repeal could hurt refineries in some regions and that "these issues are serious for those companies involved and will entail real economic costs which should not be underestimated." 

Texans in Congress have already received the message Austin sent to Washington on Friday. U.S. Rep. Henry Cuellar, D-Laredo, has joined U.S. Rep. Michael McCaul, R-Austin, and U.S. Rep. Joe Barton, R-Ennis, in pushing bills to overturn the export ban. But those proposals face a number of political obstacles, making their prospects tenuous.

Also on Friday, Abbott signed a resolution urging the federal government to speed up natural gas exports, drawing cheers from Texas petroleum groups.

“We applaud Governor Abbott for his support in repealing our nation’s outdated crude oil export ban and for encouraging an expedited process for liquefied natural gas exports from the U.S., both of which would drive further growth and security for our country, while offering supply diversity and support to our allies abroad,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association said in a statement.

Abby Livingston contributed to this report.

Disclosure: The Texas Independent Producers and Royalty Owners Association is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.