President Barack Obama is likely to ease US oil export restrictions in 2015 in a bid to reach a deal with Republicans over Iran.
Obama is going to use a change in oil policy “as a mechanism to advance American security interest and to cut deals with the Republicans,” said Bruce Bueno de Mesquita, a professor of politics and director of the Alexander Hamilton Centre for Political Economy at the New York University, in Dubai on Sunday.
Obama, a Democrat, will need the Republican- controlled Senate to approve any agreement reached with Iran over its nuclear programme next June. The Senate must ratify foreign treaties with two-thirds of the vote.
The US oil industry is subject to export restrictions that date back to the oil embargo of the 1970s. The export ban paved to ease supply concerns and prevent US producers from evading price controls by selling oil on the global market at higher margins.
Dwindling domestic production over the past four decades saw little pressure against the ban but the emergence of the Shale revolution has now seen many, including Republicans, call for a change in the law.
“There is a very good chance we could see considerable expansion of the development of oil and natural gas resources in the American part of the Gulf, as well as the Mexican part, of the Gulf of Mexico,” said De Mesquita, who has acted as an adviser to the US government.
Lifting the export ban could increase revenues for US producers, some argue, as they would be able to sell at higher market prices. Global benchmark Brent crude has fallen by more than 45 per cent since June. On Friday, December 12, Brent traded down 2.87 per cent to $61.85 a barrel.
But de Mesquita warned of the wider implications of plunging oil prices, which are likely to fall even further if the export ban is lifted, for Middle East economies.
“When belts have to be tightened seriously, then there are political interests that are put out of joint… if there are serious rumours of serious health problems … coupled with severe economic pressure, then the risk of coup d’etat or of popular uprising is substantially increased,” he said.