End of oil export ban will have a small impact in the short term The U.S. produces 9.2 million barrels per day, close to 10% of the world oil supply.

Oren Dorell | USA TODAY

Show Caption Hide Caption Oil export ban ends after 4 decades Congress ends a ban on oil exports that was put in place in the 70's. Click play to learn more.

Congress’ decision to end a four-decade-old oil export ban will help stabilize global oil supplies and protect against terrorist disruptions in the Middle East, but consumers won't see any benefits in the short term.

Lifting the ban also won't have any immediate impact on the OPEC oil cartel whose refusal to sell to the USA in the 1970s had prompted the ban.

Oil prices are near an 11-year low, and the price difference between oil produced in the U.S. and the Middle East is so small, that U.S. producers are unlikely to ship oil overseas, says Tom Kloza, chief global analyst at the Oil Price Information Service. “Right now it has very little impact,” Kloza said. “The price of light sweet crude in the U.S. and overseas is very similar.”

The ban was put in place after the 1973 Arab oil embargo launched by Arab oil producers sought to punish the United States over its military support for Israel after it was attacked by Syria and Egypt. The U.S. oil industry producers began clamoring to end the ban after the Arab Spring protests of 2011 caused a spike in Middle Eastern oil prices, while increased U.S. shale oil production caused U.S. prices to fall.

For a time, a barrel of crude was selling for $90 in the USA and $110 in Europe, and U.S. producers were missing out on those higher prices.

But those days are over.

U.S. oil now sells for around $36.25 a barrel, compared to Middle East oil that sells for 50 cents more, a difference that wouldn’t justify the cost of shipping, Kloza said.

The U.S. produces 9.2 million barrels per day, close to 10% of the world oil supply, according to the latest report by the U.S. Energy Information Agency.

A doubling in oil prices would spur U.S. shale producers to add another 2 million barrels-a-day to the market, which might lead to cheaper U.S. prices and more exports, Kloza said. But with Iranian oil expected to enter the global market as nuclear sanctions are removed, that prospect is probably several years away.

Lifting the oil export ban “could be a big deal some time in the next decade but not in 2016,” he said.

Sara Vakhshouri, an energy analyst at SVB Energy International and the Atlantic Council think tank, said the end of the export ban will help stabilize global oil prices.

Some of the world’s major producing countries, such as Iraq, Syria and Libya have oil fields that are threatened or under control of terrorists, such as the Islamic State group. International airstrikes to counter those terrorists, who have sold oil to raise funds, have destroyed oil facilities. That takes that oil off the market and affects prices, Vakhshouri said.

“So it’s really important to have supply from countries not in these areas, including the U.S.,” she said.

Karen Young, a political economist at the Arab Gulf States Institute in Washington, called the export ban “a relic of the 1970s” that will have little impact on the U.S. oil market.

Oil prices are as low as they are because Saudi Arabia, which depends almost entirely on foreign oil revenue, maintained production despite falling prices to establish market dominance in the Far East with oil importers such as China and Japan. That was done to preempt Iran’s entry into the market and to depress prices and U.S. production of more expensive shale oil, Young said.

“Ending the oil export ban drives more of the Middle East supply to the East,” she said.

The U.S. is large oil producer but it is also a large consumer of oil, and the domestic manufacturing economy is capable of absorbing excess U.S. supply.

Lifting the export ban might help U.S. producers provide a backup the next time a country such as Russia uses oil as a weapon against one of its trading partners, but the U.S. will never be able to block a major oil shock along the lines of the 1973 oil embargo, Young said.

"We are not going to be in a position to move export markets considerably, or to compete with the exports of Saudi Arabia or Russia, for example," she said. "Lifting the ban may be good for oil companies in the US, and it could potentially be useful if U.S. producers chose to selectively export oil to allies in an event of crisis."