Tight restrictions on US crude oil exports, in place for 40 years, would be lifted as part of a budget deal agreed in Congress on Tuesday that avoided a government shutdown and handed a political victory to Paul Ryan, the new Republican speaker.
The $1.1tn deal presented to Republicans in a late-night meeting by Mr Ryan would raise spending on defence and a number of domestic programmes and head off a shutdown that could have come as soon as Wednesday.
Also included was long-awaited Congressional approval for 2010 reforms of the International Monetary Fund that would give a greater voice to China and other emerging economies.
But the lifting of the ban on crude petroleum exports, which Republicans had pushed hard for, represents a significant shift in policy that many had thought impossible just months ago.
President Barack Obama’s administration has expressed opposition to relaxing the controls on crude exports, but he is seen as likely to accept a broad spending bill that also includes liberalisation of oil sales.
The crude export restrictions were introduced in 1975 to support the price controls put in place as a response to the oil crisis of 1973-74. They remained in place even after those controls were scrapped in 1981.
Removing the curbs was a policy priority for US oil producers struggling after the plunge in crude prices since the summer of last year. The industry has argued that allowing free trade in oil would boost US production, investment and jobs.
Analysts say large volumes of crude are unlikely to flow out of the US as soon as the restrictions are lifted. The spread between the price of West Texas Intermediate crude, for delivery in Oklahoma, and internationally traded Brent is only about $1.25 per barrel, meaning that any benefit for US producers from selling in world markets would be swallowed up in transport costs.
In the long term, however, the liberalisation of exports will help companies producing in the US by enabling them to find the most profitable markets for their oil.
The curbs on oil exports have been eased in recent years, but the US exported only 409,000 barrels of crude per day in September, just 4 per cent of its total production.
The budget deal marks a big victory for Mr Ryan, a former vice-presidential candidate who, since taking over as speaker last month, has made ending the gridlock in Congress a priority and promised a new pragmatism.
“That’s the way I think Congress ought to run,” he told an event earlier on Tuesday. “Let’s get back to legislators legislating. Let’s get back to actually doing things methodically, deliberating. We call this regular order around here — I call it democracy.”
The plan presented late on Tuesday calls for Congress to vote within days to approve an omnibus budget bill and a separate tax bill extending a series of tax credits that were set to expire. Those credits include support for wind and solar power, which expired at the end of last year or are set to expire at the end of next year.
Jason Bordoff, a former adviser to Mr Obama who runs the Center on Global Energy Policy at Columbia University, said: “It’s not every day that a compromise across the political aisle actually yields two good policies, but this is one of those cases. Free trade in oil plus more support for clean energy: that’s a very positive outcome.”
The $1.1tn spending deal came after weeks of contentious negotiations and the final package runs to more than 2,000 pages.
Among the main provisions in the deal are a $23.9bn increase in defence spending to $514.1bn and an additional $58.6bn to finance the fight against the Islamist extremist group Isis. Also included are changes to a visa waiver programme that would make it harder for anyone who has visited Iraq or Syria to enter the US.
While both Democrats and Republicans seemed resigned to agreeing on things they did not like, Tuesday’s budget deal still faces several votes in Congress. To avoid a shutdown and buy more time for those votes, Congress was expected on Wednesday to pass a short-term funding extension to run to December 22.