The tentative deal designed to limit Iran’s nuclear program led to a quick — though modest — decline in oil prices, raising the possibility American drivers may see a prolonged break from high gasoline prices and creating an opening for Republican lawmakers to step up efforts to end a ban on exporting oil produced in the U.S.
Analysts at Washington-based ClearView Energy Partners noted that lifting economic sanctions against Iran could return as much as 1 million barrels a day to world markets,a flow that has been cut off because of the economic sanctions imposed by the U.S. and other western nations.
That new flow could depress world prices by as much as $12 less than the $67 per barrel predicted by the end of 2016 by the Energy Information Administration, a forecast that assumed sanctions wouldn’t be lifted.
“We don’t want to belabor the obvious: The Iran deal is bearish for crude,” ClearView said in a note to clients.
EIA Administrator Adam Sieminski in April told the Senate Energy and Natural Resources Committee that higher Iran oil exports would either depress world prices by as much as $15 a barrel next year, or cause global production to slow.
The world price of oil is the key driver of U.S. gasoline prices. The national average price for unleaded regular was $2.78 a gallon on July 16, according to data compiled by AAA.
If the EIA’s predicted average summer price of $2.67 a gallon holds true, it would be the lowest since 2009. The EIA attributed the low prices to the 41 percent decrease in the price of international benchmark Brent crude since last year.
The prospect of prolonged pressure on oil prices comes as U.S. producers seek to win a relaxation of the ban on most exports of domestic crude.
They have argued that without access to world markets and expected flat demand in the U.S., growth in oil production and direct and indirect industry jobs will level off or decline.
Barry Russell, president of the Independent Petroleum Association of America, said recently the prospect of higher Iran oil exports will put U.S. producers at a “competitive disadvantage,” and that the ban should be lifted.
“As soon as Iran is permitted to export its surplus oil on the world market, why can’t we allow our own companies to do the same with their American-made surplus of crude oil?” he said.
The American Petroleum Institute also called for lifting the ban.
“Bipartisan momentum is stronger than ever for lifting ’70s-era restrictions on exports of crude oil,” API spokesman Brian Straessle said in an email. “Lawmakers increasingly recognize that crude exports will incentivize higher domestic production, create more U.S. jobs, put downward pressure on gasoline prices, and reduce the power that foreign suppliers have over our allies.”
Republicans on Capitol Hill suggested the deal could create yet another opening for Congress to consider lifting the oil-export ban.
“We will then be the only country that we sanction against oil exports, which is an interesting talking point,” Sen. Bob Corker, R-Tenn., said. “I think it could build some momentum around the fact that we should look at the way we deal with our oil in a very different way.”
Senate Energy and Natural Resources Chairwoman Lisa Murkowski, R-Alaska, said the Iran deal’s effect on the market provides a compelling argument for lifting the ban.
“If you’re going to allow Iran unfettered access to this world oil market and you’re going to deny U.S. oil producers the same, the legitimate questions is: Why?” she said, noting she had already talked to colleagues about the ban.
“I think part of what we’ve been trying to do is just get us to that point where we have greater certainty as to where the votes might be,” she said. Iran’s return to the market may “allow folks to perhaps look at this a little bit differently, and if that’s the case, I think that’s good.”
One possible vehicle for an oil-exports vote is a broad package of energy legislation that House Energy and Commerce Committee Republicans plan to release this month.
Texas Republican Joe L. Barton, the author of legislation (HR 702) to lift the ban, said he’d prefer to move his bill separately, though he acknowledged he has approached panel Chairman Fred Upton, R-Mich., about including it in the broader energy measure. (There’s a companion measure in the Senate, S 1372, sponsored by Murkowski and Heidi Heitkamp, D-N.D.)
“The bottom line is we get it done. We’ve got a good problem now,” Barton said, referring to the domestic glut of oil.
Leadership is discussing a future vote on Barton’s measure, though no decision has been made on how or when, a GOP aide said. The House is expected to vote on the committee’s energy package, which will address issues ranging from infrastructure to supply, before the August recess.
Support for eliminating the ban appears to be growing among House Republican leaders. Majority Leader Kevin McCarthy supports lifting the export ban, the aide said, and Majority Whip Steve Scalise, R-La., expressed support for the measure earlier this year. Upton hinted in June that he was willing to consider lifting it, after staying quiet about his position for months.
Critics of the push have raised concerns that U.S. gasoline prices might increase if domestic oil moves overseas as the U.S. continues to import millions of barrels a day.
While many members still hesitate to explicitly back lifting the ban, some are beginning to acknowledge that doing so could bring the United States benefits. Three GOP senators — Richard M. Burr of North Carolina, Mark S. Kirk of Illinois and John Thune of South Dakota — joined Murkowski on a letter to Director of National Intelligence James R. Clapper Jr. asking for the intelligence community to keep lawmakers apprised of its analysis of the geopolitical and security implications of the domestic energy boom.
“We agree that energy independence within North America and, perhaps, the Western Hemisphere is not only an attainable goal, but also increasingly the economic reality,” they wrote. “As the Congress considers legislation to repeal restrictions on the export of domestic crude oil and expediting exports of liquefied natural gas, our nation is also exporting record volumes of other types of energy, including petroleum products, natural gas by pipeline natural gas liquids, coal, and nuclear and renewable technology.”
The EIA is studying the potential effect of increased crude exports at the request of Congress, beyond those already allowed to Canada, and expects to issue an integrated analysis later this summer.
It has already said that exports would displace some exports of refined products, such as gasoline and diesel fuel, which are not restricted.
The U.S. has become a net exporter of refined products, driven by the shale oil boom that has raised domestic production to about 9.6 million barrels a day this year.
Oil imports have fallen dramatically, from about 60 percent of U.S. consumption in 2005 to about 26 percent last year, with the EIA predicting a 21 percent share in 2016, the lowest since 1968.