Conoco, Hess, Marathon, Others Face Lawmaker Concerns Over Gas Prices
WASHINGTON—The oil industry is gearing up for a postelection lobbying push to loosen the four-decade U.S. ban on exports of crude oil, saying that relaxing the prohibition would create jobs and stimulate the economy.
But oil producers face several challenges in the effort, even if Republicans—frequent allies of the industry—win control of the Senate in this fall's elections. While some GOP lawmakers favor lifting the ban, many others are signaling that they would resist the idea, particularly as voters remain concerned about its impact on gasoline prices.
At least 10 companies—including Marathon Oil Corp. MRO +0.05% , ConocoPhillips, COP -0.46% Hess Corp. HES +0.22% , Continental Resources Inc. CLR +0.48% and Pioneer Natural Resources Co. PXD -0.44% —are starting an organized effort to lobby for lifting the ban.
Companies that operate oil refineries present additional opposition. Refiners typically align with oil producers on policy matters, but on this issue have parted ways as their bottom lines benefit from the glut of U.S. oil. Refineries are exporting record amounts of refined products and are concerned about losing that source of profit if exported oil goes to refineries overseas.
Much of the lobbying effort will be aimed at persuading lawmakers and administration officials that the U.S. can afford to export crude oil now that the country is the world's biggest oil producer. The U.S. pumps more than eight million barrels of oil a day, up 55% from five years ago. The U.S. still imports a lot of oil, but the amount of petroleum consumed from foreign sources, 33%, is at its lowest level since 1985.
Allowing oil exports "will encourage further investments in oil and gas exploration and production, create more jobs, improve the balance of trade and create other economic benefits for our country," said Lee Warren, a spokeswoman for Houston-based Marathon Oil.
Based on laws passed after the Arab oil embargo of the 1970s, companies can export refined fuels such as gasoline and diesel but not oil itself, except in limited circumstances that require a special license from the government.
The administration of President Barack Obama cracked open the door to exports this year by allowing overseas sales of a type of ultralight oil called condensate. The Commerce Department in two private rulings allowed Pioneer and Enterprise Products Partners EPD +0.32% LP to export condensate after it was minimally processed.
"We've been out pretty publicly as a company supporting and advocating on behalf of not only the condensate exports, but the crude-oil exports as well," ConocoPhillips Chief Executive Ryan Lance told analysts and investors late last month. "The condensate solves a very, very small problem."
David Goldwyn, president of Goldwyn Global Strategies LLC, who worked on energy issues at the State Department during Mr. Obama's first term and advises some companies that would benefit from exports, said the administration can relax the ban significantly without legislation but that the president would need political support from both sides of the aisle for executive action.
"The broadest bipartisan worry is that crude-oil exports will drive up domestic gasoline prices despite the fact that every rigorous economic analysis believes the opposite is true," Mr. Goldwyn said. "Overcoming that fear is really the largest obstacle on both sides of the aisle."
In pushing for oil exports, some executives are hoping to replicate the experience with natural gas, for which Republicans rallied around exports to show support for free trade and energy security for U.S. allies in regions such as Eastern Europe.
Proponents of oil exports face a trickier calculus, in large part because of the fear of increased gasoline prices.
"There are still an awful lot of people who remember the gasoline lines we had in 1973," said Sen. Lisa Murkowski (R., Alaska), one of the few people on Capitol Hill advocating to lift the export ban. "You've got to convince with the facts—not emotions—that we can operate as a nation of abundance rather than scarcity."
Export proponents hope to win over Republican law makers by appealing to their free-market values before the industry can hope to get much support from Democrats, who typically are less supportive of energy exports.
But a broader view by the public that U.S. oil should stay at home will test export proponents.
A majority of voters, 53%, opposed exporting oil in a poll conducted this year by FTI Consulting, FCN -0.68% whose clients include oil and gas companies. Republican voters opposed oil exports more than Democrats did, the poll found.
"We have to make sure it won't impact the price at the pump, and until we make that determination, I'm not on board," Sen. John Hoeven, who is up for re-election in 2016, said late last month. The North Dakota Republican represents the nation's second-biggest oil-producing state, where drilling could increase if policy makers reduced export restrictions.
Jeff Peck, a lobbyist for Washington, D.C.'s Peck Madigan Jones, lobbies on behalf of four refineries that are opposed to exporting oil. "Once people understand the market for crude oil is not free, they quickly recognize traditional principles of free trade don't apply here," he said.
The tension between oil producers and oil refiners has been brewing since the beginning of the year, and it is likely to boil over in the coming months. As soon as the fourth quarter, politicians will begin to see that U.S. refineries can't handle the amount of oil being produced, according to Jamie Webster, senior director of global oil markets at IHS. IHS -0.29% The consulting firm in May released a study that said U.S. gasoline prices would actually fall about 8 cents a gallon if oil could be exported widely because putting more fuel in the global market would reduce world-wide oil prices.
Oil-producing companies say that the country's refineries were initially built to process heavier oil from the Middle East and can't handle the glut of light crude oil that is being extracted from shale formations such as the Bakken in North Dakota and Eagle Ford in Texas.
But Charles Drevna, president of the American Fuel & Petrochemical Manufacturers, which represents the U.S. refining sector, said new reports will show that refineries can, indeed, process the light, sweet crude from shale.
Write to Amy Harder at firstname.lastname@example.org
Corrections & Amplifications
Marathon Oil's Lee Warren is a woman. An earlier version of this article incorrectly identified her as a spokesman for the company.