United States may end 40 year ban on oil exportation

United States may end 40 year ban on oil exportation

On October 9, the House of Representatives passed The Energy Supply and Distribution Act of 2015 which, if also passed by the Senate, will end the United States 40 year ban on exporting oil. White House officials have claimed that President Obama will veto the legislation if it passes the Senate.


The decision to stop exporting oil was made in the 1970s under President Gerald Ford. The measure was a direct response to the 1973 Arab oil embargo, which dramatically raised prices in the United States. Before the embargo, oil was sold for $2.90 a barrel, but by January 1975, it had increased all the way to $11.65.


The ban on oil exportation was meant to decrease American reliance on the oil production of foreign countries, most notably the member countries of OPEC. The restrictions on exporting continued after the Arab oil embargo was lifted so that the United States could build up its oil reserves in the event of another oil shortage without undergoing significant economic damage. Since the 1970s, proponents of the export restrictions have cited the need to protect the American oil industry from foreign competition and environmental concerns as reasons to continue the protectionist policy.



The economic landscape has shifted in the years since the implementation of the restrictions. The United States is now the largest producer of oil and natural gas in the world. As oil production has revved up both in the United States and across the globe, prices have dropped. Crude oil has dropped to less than $50 a barrel in 2015. As prices have dropped, American oil companies are at a significant disadvantage because of their limited market.


Large oil companies, such as Exxon Mobil and Chevron, will lobby hard for the resolution to pass the Senate, but they have a very small chance of victory. A vote on the Energy Supply and Distribution Act will most likely split the Senate down party lines. With 54 Senate seats, Republicans could drum up enough support to pass the bill initially; however, there is little chance they could put together the two thirds majority necessary to overcome a presidential veto.


Has the United States protectionist policies toward domestic oil production outlived its usefulness? Would dropping export restrictions on oil help the U.S. economy or just help the big oil companies? Feel free to leave a comment or find me on Twitter @Andrew_Morse4

Andrew Morse

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