Leaked document reveals EU eager for US crude oil exports

A leaked document obtained by The Washington Post suggests that the EU is pressing the US to lift its longstanding ban on crude oil exports.

In the document, the EU argues that instability on the Eastern flank threatens to cut off oil and natural gas from Russia: ‘The current crisis in Ukraine confirms the delicate situation faced by the EU with regard to energy independence’.

US crude oil has remained at essentially zero exports since 1975, when Congress banned its sale to preserve access if something like the Arab oil embargo were to occur again.

Europe is currently heavily reliant on imported oil, 39% of which comes from high risk regions like the Middle East and Africa, and 42% from the former Soviet Union. The US represents a huge alternative supply source. Furthermore, the Washington Post suggests, that while US refiners have retrofitted their operations to process heavier oil imported from the Canadian tar sands before the fracking boom delivered a flood of new supply, Europe’s refineries are well equipped to handle it.

The letter additionally emphasises that both parties, the US and the EU, support free trade, and America lifting its own violation of this principle would demonstrate to countries like China that the two economic superpowers are serious about tearing down barriers.

The letter reads: ‘Combatting resource nationalism, together vis-à-vis third countries, while at the same time allowing for export restrictions to exist between us sends the wrong message to our partners and offers some of these resource-rich countries a great opportunity to interpret trade rules in a way which is detrimental to our economies’.

Iana Dreyer, who edits the EU trade analysis service Borderlex, commented: “The Europeans really want to set a precedent, to make a point, that they want free trade and a more liquid market. After the oil shock in the 1970s, energy has been so scrutinised, that the mindset has really changed – now we need a big flexible global market so that nobody can control it”.

Against the law

The crude oil export ban might actually be illegal under international trade law, however nobody has ever challenged the US at the World Trade Organisation (WTO). Despite this, the American Petroleum Institute (API) last year suggested that it might do so if the restriction isn’t lifted by other means.

Jim Bacchus, a former chair of the WTO’s appellate body, said: “Generally speaking, WTO rules prohibit restrictions on exports of any kind, unless they take the form of taxes. There has always been this notion that somehow energy products are not products that follow the scope of the WTO treaty. There’s no legal basis for that view”.

To read more on the contents of the letter discussed in this article see also ‘EU encourages abolishment of crude oil export ban’.

Edited from various sources by Emma McAleavey.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/09072014/crude_oil_export_restrictions_886/