The global glut of oil could lubricate the Washington machine enough to bring a rare show of unity. Cheap gasoline and plentiful crude could make lawmakers consider loosening the 40-year-old prohibition on exports and maybe rethink ethanol and natural gas policies.
The slide in global oil prices has Americans enjoying the lowest retail gasoline prices since 2009, even as the United States imports less crude because of booming domestic shale production. The biggest knock-on change for the new Republican-controlled Congress in 2015 would be ending the decades-old ban on petroleum exports. President Barack Obama’s administration just tweaked the rules by allowing condensate, a lightly treated oil, to be sold abroad.
Lawmakers could go much further. Unleashing U.S. crude on global markets, where similar oil sells at a premium, could even soften global prices further – helping all kinds of oil users – while scoring somewhat higher prices for domestic producers. Markets aren’t usually so compliant, but talk of that kind of win-win outcome might tempt Washington’s politicians.
Meanwhile, lower crude prices also bring back the prospect of competition for other fuels like natural gas, which has enjoyed a huge price advantage for several years. Tougher rivalry may translate into less exploration and fewer jobs. That in turn could encourage policymakers to rethink more stringent environment-saving rules for fracking. Requirements surrounding the amount of ethanol added to gasoline could also come under the microscope.
Cheap oil may, however, gunk up the legislative gears in some ways. It could make the political-football Keystone XL pipeline even less likely to be approved, with the transport of Canada’s relatively pricey oil-sands products arguably less important.
Then there’s tax reform. Obama and other Democrats often complain about the tax advantages handed to profitable big oil companies. As the energy giants make less money and become less flush – ConocoPhillips, for example, recently announced a 20 percent cut in its capital-spending budget for 2015 – those criticisms lose power.
The most sensible measure on which U.S. lawmakers could expend political capital would be to stop banning oil exports. But sliding crude prices could unite opposing politicians in less desirable endeavors, like perpetuating or adding to the welter of tax concessions companies turn to their advantage.