Oil Cos. Trying To Use Trade Treaty To Bypass Congress And Raise Prices

Dave Johnson

You may have heard that there is an oil and gas “boom” happening in the US. You might not know that there is a ban on exporting our own oil. This ban is good for the country but bad for oil companies. And the oil industry is attempting an end run around Congress to do something about it.

There is an ongoing “boom” in oil and natural gas production. Production of natural gas is way up. Imports are down about half since 2007. Texas oil production alone has more than doubled since 2011. This increase in domestic oil production has various consequences. We use much of our rail capacity transporting oil to refineries. The increase in natural gas production is pushing coal use down, and lowering carbon emissions as we fight for a transition away from using fossil fuel at all.

Even with all this production, world oil prices are holding as the world economy recovers. The world market is keeping demand high enough, especially with China’s growth and increasing its demand. Even so, oil and gas producers are terrified that our increased production could be part of a cycle that could lead to a collapse in prices. They also understand that prices in the US are lower than they would be if we could get that increased production out of the country.

To accomplish this, the oil and gas companies have pushed the Keystone Pipeline, which would move Canadian tar sands oil to US ports so it can be sold to China instead of in American markets. (The US ban on exports doesn’t apply to Canadian oil.)

Currently, that Canadian oil is piped into US refineries in the midwest. Combined with the current US oil boom this keeps prices there down. Bloomberg News explained this back in 2012, in “Keystone Oil Pipeline Seen Raising Gas Prices in Midwest: Energy“: “The line would create a new way to carry Canadian imports outside the Midwest and reduce an oil surplus that’s depressing prices in the central U.S.”

A 2013 Consumer Watchdog report found that Keystone would raise Midwest pump prices 20 to 40 cents.

Now there is a second front in the push to get oil out of the country and prices up. Restrictions on exporting US oil are also holding prices down in US markets. After the Arab oil embargo back in the 1970s, the US realized that securing a reliable supply of petroleum was an essential national interest. We created the Strategic Petroleum Reserve, and banned exports of US-produced oil. Companies can export refined products like gasoline and diesel fuel but not oil. Keeping US oil prices down is a secondary effect of the ban.

The oil companies know it won’t be easy to get Congress to lift this ban. So to get around the export ban, they are taking a tip from they way other multinationals have gotten past a reluctant Congress. They are trying get around Congress by sneaking it into a trade agreement.

Tuesday’s Progressive Breakfast included this “Breakfast Side”:

Two Senate Dems push to keep oil and gas out of European trade talks. The Hill:
“Democratic Sens. Barbara Boxer (Calif.) and Ed Markey (Mass.) said the U.S. should ‘resist’ calls from the EU to include language on exports in the Transatlantic Trade and Investment Partnership (TTIP) talks that started on Monday … A number of Republicans are gearing up to make crude exports a primary topic next year in the House and Senate. However, a majority of Democrats oppose more exports, arguing it would increase costs for consumers at home.”

The Hill article explains that Sens. Barbara Boxer (Calif.) and Ed Markey (Mass.) noticed that the oil companies were trying to sneak around Congress by pushing for this treaty to outlaw our oil export ban. It noted that “the two senators cited documents leaked earlier this year that said the EU was seeking a binding pledge that would mandate automatic crude oil and gas exports.”

This says all you need to know about how our trade agreements are being used. Senators have to rely on leaks to find out that the giant companies are using trade negotiations to get around the ability of our Congress to pass laws.

Get updates in your inbox