It’s been an exciting week for American oil producers. The U.S. hasn’t let the industry export oil overseas for the past 40 years. Now, it looks like that’s about to change.
Congressional leaders have agreed to lift the ban on crude oil exports as part of a new budget deal, though it may not have a noticeable impact on markets in the short-term.
“The immediate effects are going to be pretty muted,” says Stephanie Joyce, who covers the industry for Wyoming Public Radio. “Oil prices are so low right now that exporting really isn’t an attractive option.”
Even so, producers have been pushing to lift the ban because they see the possibility of increasing prices in the long-run.
“With the flooded domestic oil market, producers end up having to sell to refineries at a discount,” Joyce says. “If they can ship to refineries overseas instead, they might be able to get a better price for their oil.”
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And if prices go back up again, that could lead to increased oil production in the U.S.
A lot of environmental groups are not thrilled with the timing of this deal. Joyce says they feel it undermines the landmark climate change agreement just signed in Paris, which sets goals for reducing carbon dioxide emissions. The lift on the ban could lead to increased domestic drilling and greater carbon dioxide emissions.
Some scientists say that in order to achieve the less than two degree warming target outlined in the Paris agreement, countries will need to leave a third of the world’s oil reserves in the ground.
It wasn’t all bad news though for the environmental community. Democratic lawmakers did secure a five-year renewal of clean energy subsidies, in exchange for lifting the export ban.
Tax credits on wind energy expired last year, and the credit for solar was scheduled to be phased out at the end of next year.
“I’m kind of giddy with excitement,” says Steve Peplin, president of Talan products, a manufacturer based in Cleveland that makes parts for the solar industry. “It’s obviously very good news for us. We were preparing for 2016 to be a bonanza year. Projects were being accelerated to get them done before the expiration of the credit.”
Peplin says he didn’t really expect lawmakers to move on this issue until 2016, when the credits were set to expire.
“I’m really shocked that they got behind this. And, you know, the timing’s perfect, with the Paris accords and all.”
Additional reporting by Julie Grant