NEW YORK (AP) — The U.S. could soon end restrictions on oil exports put
in place in the mid-1970s. The lifting of the embargo is part of a
spending deal expected to be pushed through the House and Senate by the
end of the week. Here are the reasons why the ban was in place, why is
it is now being lifted and how consumers and businesses will be
affected.
GAS LINES
Of
all the bad memories seared into the American consciousness from the
1970s, never-ending lines at the gas pump tops the list for many people.
The Organization of Petroleum Exporting Countries put into place an oil
embargo after the U.S. sided with Israel in the Yom Kippur War and the
price of oil spiked from $3 to $12. A ban on oil exports was put in
place in December 1975, with some exceptions. Companies were allowed to
export oil to some countries with special approval, and exports to
Canada have increased in recent years.
PRODUCTION REDUCTION
The
country's oil supply problem was made more precarious when domestic
production began a long decline in the 1970s as oil fields matured. Even
with a temporary surge in production from Alaska in the 1980s, the U.S.
was forced to rely more and more on imports. U.S. production, which had
reached almost 10 million barrels per day in the early 1970s, was
halved by 2008.
SO WHAT'S CHANGED?
Technology. U.S. energy
companies have developed new techniques that have dramatically increased
oil production from fields once thought to be virtually empty or
unreachable. U.S. oil production rose from 5 million barrels a day in
2008 to more than 9 million barrels a day this year, increasing global
supply faster than demand. This week, crude prices fell below $35 per
barrel, down from more than $100 per barrel in June of last year.
WINNERS AND LOSERS
Major
oil companies and the U.S. economy. Companies including Exxon Mobil and
ConocoPhillips, along with the American Petroleum Institute, an oil and
gas lobbying group, have been the biggest proponents of ending the ban.
But the economic benefits could be very broad. Economists say exports
could help the economy by reducing fuel prices — there are a lot of U.S.
industries for which energy is a huge cost, from agriculture, to
airlines, to manufacturing. Exports should also encourage investment in
oil and gas production and transport, create jobs, make oil and gas
supplies more stable and reduce the U.S. trade deficit.
Still,
environmental groups worry that the rush by U.S. energy companies to
supply the world with crude will lead to more local pollution and higher
global emissions.
THE PRICE IS RIGHT
Allowing
U.S. oil to compete in overseas markets should help lower the price of
international oils, as measured by the price of Brent crude. U.S.
refiners still import a large amount of foreign oil to produce gasoline
and other fuels, so the price that U.S. drivers pay at the pump is
closely tied to the price of Brent. Right now, thanks to low oil prices,
many U.S. consumers are paying around $2 on average for a gallon of
gas.
BATTLE LINES
The
end to the four-decade ban on U.S. crude exports was the big prize in
the budget battle for Republicans, who saw it as an arcane policy given
the nation's exploding production of oil and natural gas. In return,
they agreed to the demand from Democrats for a five-year extension of
credits for wind and solar energy producers and a renewal of a land and
water conservation fund. Democrats also blocked a push by Republicans to
GOP proposals to impede Obama administration clean air and water
regulations.
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