President Barack Obama has lifted the country's 1975 ban on crude oil exports.What does this mean for the oil price? Simon Wilson reports. What's happened? The US has ended a 40-year ban on crude oil exports, following a U-turn by President Barack Obama and a rare case of bipartisan co-operation at the top of US politics. The deal to lift the oil ban was driven by the Republicans; while support from the Democrats traditionally more protectionist and more concerned with environmental issues was won by giving a five-year extension on tax credits on renewables. It's a "rare example" of a trade-off that produces two good outcomes, reckons the Financial Times. And the lifting of the export ban is an "overdue victory for economic sanity", which should make markets more efficient in the long run, while bolstering the credibility of US support for free trade. Why were exports banned? To try to keep petrol prices down for American consumers. Congress passed the ban in 1975, in the wake of the oil-price shock of 1973, when the Arab Organisation of Petroleum Exporting Countries (Opec) nations slapped an embargo on exports to America (as well as the UK and several other nations).

The idea behind the American export ban was that if domestic producers were unable to export their crude, domestic supplies would stay strong, keeping the price of refined products, such as petrol (gasoline), down. Given that America has historically been by some distance a net importer of crude, domestic producers didn't feel too heavily penalised by not being able to export the stuff. So what changed? The shale revolution means the US is no longer dependent on foreign oil. There's a decent domestic surplus, which producers have been agitating to sell abroad. The point at which the US produced more oil than it imported (for the first time in decades) was reached in 2013. Then, in June 2015, the US passed Russia and Saudi Arabia to become the world's biggest producer of oil and gas. That means that the export ban designed to protect US consumers has caused a huge build-up of inventories to record highs (this despite a partial easing of the ban, under rules which allow some exports to Canada and Mexico). Why is that a problem? It has left producers drowning in an excess of oil, forcing them to cut spending on rigs and jobs. According to Goldman Sachs, there was also a danger that if the industry's surplus breached "logistical and storage capacity", there could be a collapse in prices to the cost of production around $20 a barrel. That matters (say big producers and industry analysts) because if low domestic prices render drilling unprofitable, it poses a grave risk to the US energy industry, and to the long-term strategic goal of US energy independence. What effects will the change have? In the US, a study by consultants IHS earlier this year found that free trade in crude would boost output, investment, jobs, pay, profits and tax revenues, and push up GDP by $86bn. The same study found that ending the ban would not put up petrol prices (since these are set in the freely traded world market) they would probably fall a bit. Globally, the end of the export ban will have three "potentially positive outcomes", reckons The Economist.