The U.S. ban on exporting oil may not live to see its 40th birthday

December 14, 2015

Money.CNN.com

There's growing momentum to kill the restriction and a deal could be reached before the end of the year as part of a broader spending and tax bill that's making its way through Congress.

Proponents argue the restriction is terribly outdated. It was signed into law on December 22, 1975 when the OPEC oil embargo created a shortage that slammed the American economy with skyrocketing prices.

No scarcity of oil

Today, the world has too much oil -- thanks largely to the American shale oil boom. That's why crude oil prices have crashed below $35 a barrel and a gallon of gasoline is on the verge of falling below $2 per gallon.

In other words, there is no longer an oil scarcity that justifies keeping it at home. In fact there's too much of it.

"Restrictions on free trade of energy are a legacy of a bygone era that doesn't reflect the realities of today," said Jason Bordoff, a former energy adviser to President Obama who testified on Capitol Hill about this issue.

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Lifting the ban could keep gas cheap

A big reason for the momentum is the fact that gasoline prices are down by half since peaking in 2008 at $4 per gallon. Politicians have less reason to fear voters will blame them for high gas prices caused by allowing U.S. oil to be sold overseas.

But that logic is flawed anyway. Gas prices are set by Brent oil, the global benchmark.

In fact, U.S. oil actually trades at a discount to Brent. That's because American oil producers can't currently export to overseas refiners who are willing to pay a bit more.

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