By Gulbin Yildirim & Ovunc Kutlu
WASHINGTON
Global energy prices are expected to drop if the U.S. removes the ban on its oil exports and lifts restrictions on gas exports after the congressional elections in November, experts say.
The four-decade ban on U.S. oil exports began after the Arab countries' oil embargo in 1973 revealed the vulnerability of the U.S.' dependency on foreign oil resources.
With the ban, the U.S. aimed to keep domestic oil production in the country in order to serve its economic growth, while alleviating its oil dependency on foreign resources.
Many actors in the U.S., however, advocate that the growth of the energy sectors have transformed global markets, and they believe that the removal of the oil exports ban was essential.
With the shale revolution in 2008, the U.S. crude oil production increased significantly from 1.8 billion barrels in 2008 to 2.7 billion barrels in 2013, according to the U.S. Energy Information Administration (EIA).
"The removal of the ban will bring energy prices down," said Jean Seznec, a visiting associate professor at Georgetown University’s Center for Contemporary Arab Studies.
A joint report, called “Changing Markets: Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports,” released by the Brookings Institute in Washington D.C. and the National Economic Research Associates (NERA) on September 9, said the removal of the ban would strengthen the American economy and increase the global power of the U.S.
"When the ban is removed, there will be more crude oil in the global market. Both refined and crude oil prices will drop. All oil net-importer countries will benefit from that," Robert Baron, a consultant with NERA, told the Anadolu Agency.
Baron said that removing the oil ban will not be limited to only benefiting the U.S. economy, adding that the decision to sell U.S. crude oil should not be a political decision, but an economic one, while oil exports should not be used to mitigate geopolitical tensions.
"The U.S. should not limit its oil exports to some countries or regions. Oil is for the global good and the U.S. should sell its excess crude oil as part of this market," he added.
However, there are still some political bottlenecks that have to wait until a consensus is reached by the U.S. Congress, who have the authority to lift the ban on oil exports.
"I do not think the Obama administration will make a move before the congressional elections in November," said Baron. "The results of the election will play a significant role for lifting the ban on oil exports."
The Democratic Party holds the majority in the U.S. Senate, while the Obama administration aims to gain control in the House of Representatives in the November elections.
Baron said that while the Democrats are more cautious than the Republicans on lifting the ban, the Obama administration can remove the ban partially to soothe the Democrats.
"There will be concessions made for the partial removal of the ban, which I believe is not serving the interests of our nation. Removing the ban partially is better than doing nothing, but lifting it completely will benefit our country much more," Baron said.
U.S. shale revolution and restrictions on gas exports
While the U.S. shale gas revolution in 2008 paved the way for domestic gas production to exceed gas consumption, the U.S. also has restrictions on exporting natural gas.
U.S. companies are allowed to export liquefied natural gas (LNG) to whom the U.S. has a free trade agreement (FTA) with; while LNG exports to non-FTA countries have to be firstly authorized by the U.S. Department of Energy.
"If the restrictions on exporting LNG are partially removed, the U.S. can sell natural gas to many countries from the Gulf of Mexico," said Seznec, adding that allowing exports of LNG is also significant.
Seznec said that if the U.S. supplies LNG at a cheap price to the Asia-Pacific region including countries like China, Japan, and South Korea, this supply competition would negatively affect the economies of the Middle Eastern countries who also supply to this region.
The U.S. shale gas revolution in 2008 has increased domestic shale gas production from 1,300 billion cubic feet (36 billion cubic meters) in 2007 to 10,000 billion cubic feet (280 billion cubic meters) in 2012, according to the U.S. Energy Information Administration (EIA).
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