Big push to export U.S. oil

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."

Oil exports to Canada have occurred with some regularity over the years, though they have spiked recently in the wake of America's new oil boom. Shipments to other countries have been rare.

The Obama administration has the latitude to clear the way for more U.S. oil exports. He could, for example, exercise discretion on the definition of "national interest" so that the Commerce Department would be obliged to grant all export license requests. But that's unlikely given the risk of a public backlash. So the industry's wish for unfettered oil exports will have to be granted by Congress.

Getting politicians to propose and back oil export legislation could be tricky, though. Lawmakers who have traditionally aligned themselves with the industry, especially, could be accused of sending consumers mixed messages about the reasons for boosting domestic oil supplies.

For years, the oil industry and its Congressional supporters have tapped the public's ingrained oil-supply and gas-price fears—at times, even reinforced them—to win support for industry-friendly legislation and to beat back regulations that might discourage domestic drilling. Many politicians are still emphasizing the notion that robust U.S. oil production and imported Canadian oil are the keys to insulating the nation from the influence of oil-rich members of OPEC, the Organization of the Petroleum Exporting Countries.

Michigan Rep. Fred Upton , a Republican and strong oil industry advocate, is among those who would have to reconcile apparently contradictory messages if he were to take up the oil export issue. Last month, he touted the ongoing U.S. oil boom, declaring in a press release that because of the production surge, "we now have the opportunity to take back control of our energy future and liberate ourselves from OPEC's influence."

Upton, who chairs the House Energy and Commerce Committee, uses similar language to push for approval of the Keystone XL oil import pipeline. Because of its cross-border characteristics, the Canada-to-Texas project needs a State Department determination that the pipeline is in the national interest.

"Canada's dramatic energy growth, combined with our shale energy boom here in the United States, has finally put the goal of North American energy independence within reach," Upton said in an editorial earlier this year. The pipeline, he said, represents "an opportunity for America to increase its access to affordable and secure North American energy supplies."

The energy security argument has played a critical role in bolstering American public support for the Keystone XL pipeline, according to a string of public opinion polls. The most recent survey found  that 56 percent of U.S. respondents viewed the project favorably because it represents "a chance to reduce dependence on oil imports from less reliable trading partners," according to Bloomberg News, which commissioned the poll taken in early December.

With the United States still importing almost half of the crude oil it consumes, could Upton and others now argue that it's in the country's interest to export our own crude to China and other potentially unfriendly bidders?

Tom Kloza, longtime oil market analyst for the Oil Price Information Service and gasbuddy.com, thinks that would be treacherous territory for any politician.

"That is a toxic, toxic issue," he said of the move to eliminate the oil export ban. "Any Congress person who would suggest that in 2014 would be [politically] dead. It would be like suggesting that on every third Friday of the month, men should wear hoop skirts."

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