Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on April 20, 2014
Lifting U.S. oil export ban would mean greater dependence on foreign oil
The United States today is a large net importer of crude oil and refined products. And, yet the story that the country can somehow export crude oil as a foreign policy measure to help reduce Ukraine’s dependence on Russia won’t die. Oil executives and their surrogates keep bringing it up, and unsuspecting reporters amplify a message that has absolutely no basis.
The reason for this oil industry public relations blitz on the Ukraine is rooted in the industry’s desire to end a decades-old ban on U.S. crude oil exports–one which the industry hopes to persuade Congress and President Obama to overturn. There is, in fact, a case regarding market efficiency for overturning the ban, but this is NOT the one the industry is using in its public relations campaign.
Here’s why: The major effect of lifting the ban would be to allow domestic producers to sell lighter grades of crude oil–which U.S. refineries have little remaining capacity to refine–to foreign refineries which do have spare capacity. Perversely, that would lead to GREATER imports of foreign oil–mostly heavier grades–more suitable for the current U.S. refinery infrastructure. Net imports would remain unchanged, of course, even as the country’s oil supply becomes more vulnerable to events abroad.
But the new arrangement would allow domestic producers to receive a higher price–the world price–for their lighter crude which comes increasingly from wells in deep shale deposits such as the Bakken in North Dakota. This oil has been selling at a discount to world prices since there is more of it in the United States than domestic refiners can currently handle. The oil market would become more efficient, but at some cost to energy security.
You don’t have to take my word for any of this. Here’s what Ken Cohen, Exxon’s vice president of public and government affairs, told The Wall Street Journal:
Exxon has long supported free-trade policies, and argued that the same rules of trade should apply to oil and natural gas as to any other product made in the U.S.A. Beyond the ideology, too much crude from Texas and North Dakota has been pushing down oil prices in the U.S. Exxon, as the nation’s largest energy producer, wouldn’t mind getting higher prices for its crude.
How do I know that this change in policy would lead to greater imports of foreign oil? Cohen again confirms this:
But when it comes to oil, refiners are particular about the flavor of crude they use. The rise in fracking has unleashed a large volume of light, sweet crude oil – while American refineries along the Gulf Coast are generally set up to handle heavier crudes from Mexico and Venezuela. So there’s a mismatch. U.S. oil producers want the option of exporting some high-value light oil, leaving refiners to import lower-cost heavy oil.
At least in this interview Cohen is being straight about the real reasons the industry wants the export ban lifted. And, he has a point when he says that U.S.-based companies–with the exception of oil companies–are generally free to sell their products and services to the highest bidder worldwide. Whether his complaint carries weight depends on whether you believe energy is just another commodity or one that has a special role in the economy. That special role can be simply stated as follows: Nothing gets done without energy and so energy is, in fact, a unique commodity that deserves special treatment.
Now, you can imagine that the above argument is not one that will move Congress or the president to act. So, the industry–which can now say that it has already acknowledged its real argument–is making another argument, albeit a specious one, that we can somehow exert influence on the Ukrainian crisis in a way that will undermine Russia if only the United States would allow oil exports.
I tried to put this nonsense to rest in a previous piece citing America’s continuing dependence on imports which remain close to 50 percent of our true petroleum consumption. But, let me try another simpler, visual way to show how ridiculous this argument is. Jim Hansen of Ravenna Capital Management pointed to the following graph available on the website of the U.S. Energy Information Administration. It’s a graph of U.S. imports of crude oil and petroleum products from Russia.
U.S. imports from Russia remain above 400,000 barrels per day. Is it the plan of those who advocate U.S. oil exports to the Urkaine to import more oil from Russia so we can export it to the Ukraine? How exactly would this weaken Russia? Or change the world oil supply situation?
It really has gotten that absurd.
10 Comments on "Lifting U.S. oil export ban would mean greater dependence on foreign oil"
Boat on Sun, 20th Apr 2014 7:14 pm
http://www.eia.gov/dnav/pet/pet_move_impcus_a1_NRS_ep00_im0_mbbl_a.htm
This chart would argue with that chart.
Kurt Cobb on Sun, 20th Apr 2014 7:31 pm
The data cited in the comment above are for total barrels per YEAR in thousands. The data for my chart are for thousands of barrels per DAY. If you click on “Period/Unit” on the webpage and change to “Annual-Thousand Barrels Per Day” you’ll see the data I used. These data are not “arguing” with each other. They are simply for different time periods, per day vs year.
shortonoil on Sun, 20th Apr 2014 11:37 pm
There may also be another reason that the oil industry wants to lift the export ban (see my post here):
http://peakoil.com/consumption/us-exporting-a-tidal-wave-of-gasoline-other-fuels
The US is already producing more condensate than it can use, and with the Duvernay coming on line in a couple of years there is likely to be a flood of it. This is probably just a prelude by the oil industry to get the condensate band lifted. Without a market for its condensate the shale industry would be in serious trouble. Cohen is almost telling the truth. If shale production is weakened the US refinery industry is much more vulnerable to its foreign suppliers.
This problematic; the industry has been trying to convince everyone that condensate is crude. Of course it isn’t, but they can’t come out and say that! They have gotten themselves into a PR SNAFU! I’ll be interesting to see how they play it.
http://www.thehillsgroup.org
westexas on Mon, 21st Apr 2014 12:24 am
There is of course an obvious way to lessen Western Europe’s dependence on Russian crude oil.
The US could boost its imports of Russian crude oil by 2 mbpd, and then we could export 2 mbpd of crude oil to Western Europe.
Problem solved!
Perk Earl on Mon, 21st Apr 2014 5:44 am
Westexas, better yet they could meet the Russian oil shipments in transit, slap magnetized US nametags over the Russian names, change the flags, and re-route to the EU, pay for it with US taxpayer money (which our govt. loves to spend wildly around the globe), sell it to the EU for pennies on the Euro and they will think we are awash in oil here in the US.
Then not only will we be fooling ourselves but also the EU. Russia won’t care as long as they get paid.
rockman on Mon, 21st Apr 2014 12:34 pm
“The US could boost its imports of Russian crude oil by 2 mbpd, and then we could export 2 mbpd of crude oil to Western Europe.” What most don’t realize is that we are already effectively doing that. We are refining every bbl of Russian oil as well as that of our other oil import suppliers, and shipping the diesel et al to the EU and elsewhere. The good news is that the US gets the refinery jobs (and pollution) and the EU gets the advantage of the Russian oil exports: the global appetite for diesel remains voracious in both Latin America and Europe, hitting a record 1,394,000 b/d for the week ended December 13, according to the EIA data. And other refineries, such as that partially owned by Saudi Arabia, are moving away from gasoline and more towards exportable diesel: With US gasoline demand down, refiner Motiva is mulling closing the gasoline-making fluid catalytic cracking unit at its 235,000 b/d Convent, Louisiana, refinery in 2016.
The EU is already benefiting from oil production exported by Russia, Saudi Arabia, Canada et al thanks to the US importing, refining and shipping products to the EU. Think about it for one minute: how many Mercedes are cruising down the German autobahn right now that have diesel in their tanks that was refined in Texas from Russian oil?
So one again let’s form a circle, grasp hands and sing: “We are the world…”. LOL.
rockman on Mon, 21st Apr 2014 1:17 pm
Finnally found a valid number: from July 2013 the US was exporting refined products to the rest of the world at the rate of 58 BILLION gallons per year. This is an increase of 65% from 2010.
To put that big number into perspective: we are exporting yearly about 180 gallons of product for every man, woman and child in the US. Or roughly 25% of US refinery production.
Nony on Mon, 21st Apr 2014 3:05 pm
If you want to incentivize US productions, then collapse the WTI-Brent spread. Allow exports. It’s silly not to. We have light oil which is worth a premium world-wide, but have refineries which are built to better function on cheap (but hard to refine) heavy oil.
rockman on Mon, 21st Apr 2014 3:11 pm
“If you want to incentivize US productions”. Are you nuts: give a US industry incentive to make more money?!?! I knew you were “un-American” but didn’t realize how much. LOL.
Nony on Mon, 21st Apr 2014 8:01 pm
Well…now you know. 😉
https://www.youtube.com/watch?v=DJETB-MfpnQ