What is S. 2886?
(Updated October 25, 2018)
This bill — known as the Block All New (BAN) Oil Exports Act — would reinstate the ban on the export of crude oil and natural gas produced in the U.S. It would give the president the authority to issue rules to ban exports of coal, petroleum products, natural gas, or petrochemical feedstocks. It’d also authorize the president to ban exports of supplies of materials or equipment that the president determines to be necessary to maintain, produce, refine, or transport energy supplies and supplies of materials or equipment that the president determines to be necessary to construct or maintain energy facilities within the U.S. The president would maintain the ability to exempt any crude oil or natural gas exports that are important to the U.S.’ national interest from the export ban.
All export bans on oil would have to account for the national interest in not interrupting or impairing the following:
Exchanges in similar quantity for convenience or increased efficiency of transportation with persons or the government of a foreign state;
Temporary exports for convenience or increased efficiency of transportation across parts of an adjacent foreign state before reentering the U.S.; and
The historical trading relations of the U.S. with Canada and Mexico
The Secretary of Commerce would be responsible for developing regulations that bring this export ban into effect. There would be a public comment period related to the rule for interested persons to comment on it as soon as practicable after it’s put forward by the Commerce Department.
Argument in favor
Oil exports make American customers more vulnerable to price shocks, and cause U.S. consumers to pay more at the pump. Banning U.S. oil exports will help shore up the Strategic Petroleum Reserve (SPR), an important protection against international price shocks.
Argument opposed
It’s bad for both consumers and producers to ban U.S. oil exports: producers need access to international markets when they have too much oil to sell domestically, and consumers need access to international oil, which has different characteristics from U.S. oil.
Impact
Oil exporters; Energy Policy and Conservation Act; Strategic Petroleum Reserve; the Secretary of Commerce; and the president.
Cost of S. 2886
A CBO cost estimate for this bill is unavailable.
Additional Info
In-Depth: Sen. Edward Markey (D-MA) introduced this bill to protect American drivers from rising gas prices, which he blames on President Trump exacerbating geopolitical uncertainty around the globe and roiling oil markets and lifting the 40-year ban on exporting American crude oil:
“President Trump loves having his name on things – towers, steak, universities – and now his name is associated with higher gas prices. President Trump’s incoherent foreign policy has been driving up prices for America’s drivers by increasing risk and roiling markets. This increase in oil and gas prices is a ‘Trump oil risk tax’ and Americans are paying the price at the pump. President Trump says his agenda is ‘America First’, but the policies he and Republicans are pursuing put Big Oil first and American consumers last.”
In addition to introducing this legislation to ban oil exports, Markey has also asked the Department of Energy (DOE) about the current state of the Strategic Petroleum Reserve (SPR) and called on the Government Accountability Office (GAO) to complete a review and report on the effects of crude oil exports on American consumers and the economy.
The American Petroleum Institute (API), Independent Petroleum Association of America (IPAA), and Brookings Institute support U.S. oil exports. The API, the only national trade association representing all facets of the oil and natural gas industry, contends that there are multiple reasons for the U.S. to remain both an importer and exporter of gas:
“First, while we point out that oil is a global commodity, almost no one consumes oil directly. It must be refined into the fuels, feedstocks, materials and products that we purchase and use in our daily lives. This means that physical characteristics – such as where oil is produced versus where there is refining or manufacturing plants, or the location of the greatest consumer demand – affect its usefulness and therefore value. At the same time, you need different kinds of oil to make different products and, despite the rapid increase in domestic oil output, significant portions of the oil that is being produced here may not be what is needed to make all of the products Americans use. This underscores the need for flexibility in trading oil internationally – marketing supplies that might not match local needs to global buyers – which is integral to unlocking the United States’ productive potential. For these reasons and others it’s neither practical nor in our country’s best interest to keep American oil here at home and opt out of the global crude market… Ultimately, banning exports is misguided energy policy because it could disrupt new sources of crude oil production that otherwise would not be needed domestically, and the supporting economic activity that has accompanied it could be squandered... [T]he different locations, qualities and quantities of U.S. crude oil explain why the U.S. has continued to import and export crude oil even as it has become abundant domestically. These activities are integral to the 10.3 million U.S. jobs supported by the natural gas and oil industry and the broader U.S. economy. The right policies, though, are necessary to help sustain the energy renaissance and continue to foster domestic production. This means increasing access to resources (onshore and offshore), expanding infrastructure and cogent policies that enhance trade, reduce tariffs and protect investments at home and abroad."
Sen. Lisa Murkowski (R-AK), ranking member of the Senate Energy and Natural Resources Committee, is a longtime advocate of oil exports, calling it “good policy” to allow exports of U.S. energy.
This bill has the support of two cosponsors, both of whom are Democrats.
Of Note: Since President Trump took office, gas prices have risen 25%, causing the average U.S. customer to now pay approximately an additional $350 per year.
According to the U.S. Energy Information Administration (EIA), the U.S. exported 2.57 million barrels of oil per day in May 2018 — an all-time record rate, outpacing the same time period in 2017 by 1.48 million barrels per day.
U.S. crude oil exports were banned for 40 years, from 1975 to 2015. The ban was originally put in place two years after an OPEC oil embargo that banned oil sales to the U.S. sent gas prices skyrocketing, and was lifted in 2015 when President Obama signed the Consolidated Appropriations Act of 2016 into law with a provision stating that “to promote the efficient exploration, production, storage, supply, marketing, pricing, and regulation of energy resources, including fossil fuels, no official of the Federal Government shall impose or enforce any restriction on the export of crude oil.”
Proponents of allowing U.S. oil exports argue that it increases production, raising revenue by at least $1.3 trillion on an annual basis, which would increase U.S. GDP by approximately 1% — a substantial increase for a developed nation. They also argue that it creates 400,000-964,000 jobs, and results in more innovation in the oil market as capitalism kicks in and oil producers compete to bring their products to market at the lowest possible rates.
Those who oppose U.S. oil exports contend that there is a real risk of the U.S. becoming a resource-reliant economy if it exports too much, and point out that exports deplete the SPR.
Media:
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Sponsoring Sen. Ed Markey (D-MA) Press Release
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Sen. Markey Report, “The Trump Oil Risk Tax: Driving Up Prices for America’s Drivers” (Context)
Summary by Lorelei Yang
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