Why Lifting the U.S. Oil Export Ban May Not Lift the Economy

A negotiated spending bill that if passed as expected will help avoid a shutdown of the federal government has environmentalists celebrating—and concerned. The legislation, expected to win Congressional approval this week, would eliminate the 40-year ban on exporting U.S. oil while also extending subsidies for solar and wind power.

Republicans in Congress, who have sought to repeal the oil export ban for years, argue that selling oil overseas will create jobs and revenue in the U.S. energy sector, which has been hurting thanks to declining crude prices. It would also erode global dependence on sometimes volatile countries in the Middle East. “We have an opportunity to modernize our energy export policy and make America a world leader on issues of trade, the environment, and energy production,” said Senate Energy Committee Chair Lisa Murkowski of Alaska, a Republican. “We must seize it.”

Congress first imposed the ban in 1975 following an oil crisis that saw the price of a barrel more than quadruple when Arab members of the Organization of Petroleum Exporting Countries (OPEC) refused to export their oil to the U.S. Policymakers also faced declining domestic oil production following a peak in 1970 as existing wells began drying up. The decline continued until 2009 when production began to rise thanks to advances in technology like hydraulic fracturing, better known as fracking, which allows drillers to reach previously unaccessible sources.

And as domestic oil supplies have become more widely available, prices have plummeted. The cost of a barrel of crude oil has dropped by two-thirds since the summer of last year, with little expectations of a rise any time soon. Low global costs of oil has also reduced the relevance of lifting the oil export ban. Oil can be easily accessed in most parts of the globe at relatively low cost and foreign markets don’t need U.S. oil, energy experts say.

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But environmentalists have called the repeal a step backwards. The decision comes just days after countries committed to an historic agreement to reduce their greenhouse gas emissions. Greens say any incentive to increase drilling runs contrary to that deal and lessens the chances of meeting the agreement’s goal of holding temperature rise well below 2°C (3.6°F) by 2100. President Barack Obama opposes lifting the ban, but observers on both sides of the aisle doubt that he will hold up funding the U.S. federal government over it.

“Caving on the oil export ban is like a group of firefighters giving an early Christmas present to the local arsonists,” said Jason Kowalski, policy director at 350.org, in a statement. “Big Oil’s business plan is to burn the planet and lifting the ban just adds fuel to the fire.”

But in exchange for lifting the export ban, Democrats in Congress were able to win concessions on key environmental provisions in support of environmental causes, including a five-year extension of tax credits for production of solar and wind energy ranks. Democrats said that the provisions would create tens of thousands of green jobs and reduce carbon emissions by a greater magnitude than lifting the export ban would increase them.

“There is a lot to be said, pro and con, about this agreement,” said Democratic Senator Barbara Boxer in a statement. But “the extension of tax credits for solar and wind energy ‎is a game changer.”

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