As part of a year-end budget deal, analysts are warning that the decades old ban on U.S. crude oil exports will be among the first to go.
Opponents of the ban said at a Senate hearing Thursday that the rise of the Islamic State and the recent terrorist attacks in Paris and in San Bernardino, California, earlier this month made eliminating the ban even more pressing.
Oil smuggling by ISIS is a principle source of its funding.
“This oil is helping to finance terrorism, and significantly finance terrorism,” Sen. Lisa Murkowski, R-Alaska, chairman of the Senate Committee on Energy and Natural Resources, said at the hearing. “I have long argued that energy security is central to national security.”
Peter Cohn, an analyst at Height Securities, said it was “remarkable” how members of Congress have shifted their opinions on the export issue over the past year, particularly within the last week.
“Helping U.S. oil producers’ cause is the fact that other Republican policy priorities are absolute non-starters for the Democrats,” Cohn said. “While the Democrats generally don’t like the idea of lifting the ban, they don’t view oil exports as extraordinarily harmful and thus it makes perfect ‘trade bait’ for
provisions they want in the budget and tax bills.”
Over the last five years, annual U.S. oil production has gone from about 5 million barrels a day to about 9 million barrels per day, reflecting the energy industry’s “fracking” revolution.
Some oil drillers say many refineries don’t have the capacity to process their crude, so they want government permission to sell more of it overseas.
Congress approved the four-decades-old export ban after the Arab oil embargo of the early 1970s.
Supporters have favored keeping it in place to help protect the environment – shipping the oil by tanker creates risks of spills – and because the U.S. continues to import millions of barrels of oil a day, though the amount has fallen significantly in recent years.
The administration has opposed legislation to end the ban, but on Thursday stopped short of saying President Obama would veto a budget bill containing such a provision.
“We believe it’s unnecessary for Congress to take that step, primarily because there’s authority that already rests with the executive branch to make that decision,” Josh Earnest, White House Press Secretary, said during a briefing on Thursday.
Negotiators from both parties in the House and Senate are expected to reach an agreement on a long-term budget deal for the government as early as next week.