... Stop Fooling Around, Allow Exports

Stop Fooling Around, Allow Exports

Banning U.S. crude oil exports seems like an April Fools’ joke left over from the 1970s. The decade saw a number of big changes in the U.S. energy landscape, including the creation of the Department of Energy in 1977. After a series of booms in production dating back to the early 1900s, U.S. oil production started to decline in 1970. But the big trouble came in 1973, when OPEC proclaimed an oil embargo.

By the end of February 1974, AAA reported that 20 percent of U.S. gas stations had no fuel. Oil prices quadrupled, and the U.S. government enacted a number of measures to conserve dwindling energy supplies.

In that effort, Congress implemented a national speed limit of 55 mph via the 1974 Emergency Highway Energy Conservation Act, and fuel rationing became a part of everyday life in America. The 1975 Energy Policy and Conservation Act established a number of measures that continue to shape U.S. energy policy today, including the establishment of the Strategic Petroleum Reserve and the ban on U.S. crude oil exports.

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While there are certain exceptions to the ban granted by the U.S. Commerce Department, the total amount of crude exported in 2014 was a mere 336,000 barrels per day (bpd), according to the U.S. Energy Information Administration. That’s out of 8.7 million bpd produced last year.

The majority of the crude produced in the United States last year came from shale formations, which contain a lighter variety than what domestic refineries are optimized to handle, according to Peter Lidiak of the American Petroleum Institute. Because this crude has no outlet, domestic storage is reaching capacity, which in turn constrains production.

Lifting the export ban would change the game.
“In a short amount of time, with the removal of the export ban, the United States could have a net export of 2 million barrels per day,” says Lidiak, adding that lifting the ban would allow U.S. producers to “put that lighter crude into the global market, but still import the heavier crude needed for refineries here.”

If exports were allowed, the United States could increase exports to about 23 percent of the crude it produces, compared to the current rate of about 4 percent exported last year. That kind of increase would continue to drive production and provide a new revenue stream for the GDP.

The increase in production would also optimize current and planned pipeline capacity and help ensure that new pipeline development continues.

Increasing oil and gas exports is also a big topic in Canada, where demand is driving the development of new projects to carry products east and west to serve new markets in Asia and Europe, as well as undeserved areas in the Provinces.

The crude oil export ban is a relic that needs to be repealed. Allowing exports just makes too much sense — not to mention cents.






Brad Kramer
Managing Editor
Twitter: @NAOGP1

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