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Page added on December 14, 2013
Exporting American Oil: A Primer
Exxon Mobil says the U.S. should lift its decades-long restriction on exporting crude oil. ”We are not dealing with an era of scarcity, we are dealing with a situation of abundance,” Ken Cohen, Exxon’s vice president of public and government affairs, told the Wall Street Journal.
Here’s what’s behind the ban – and the energy industry’s effort to reverse it:
Why can’t Pumped-in-the-USA crude be exported?
In 1973, some members of the Organization of Petroleum Exporting Countries stopped selling crude to the U.S. in retaliation for its support of Israel in a war with Egypt and Syria. The oil embargo,which sent crude prices soaring, scared the pants off U.S. policymakers. In response, Congress made it illegal to export U.S. oil without a license, as part of an effort to bolster conservation and cut oil imports. Later, exceptions to this rule were added, allowing oil from Alaska’s North Slope and from the Strategic Petroleum Reserve to exit the country.
Are a lot of licenses granted?
Not really, and most are for export to Canada. Valero Energy, for instance, has gotten a license to export Texas crude from Corpus Christi to its refinery in Quebec, Canada. The Bureau of Industry and Security, which handles license requests, doled out 66 in 2012 and 45 in 2011. The U.S. exported about 56,000 barrels a day of oil in October, according to federal data. That’s less than 1% of the 7.7 million barrels a day that energy companies in the U.S. pumped that month.
What would it take to end this de facto ban?
Congress would have to amend an existing law. This doesn’t seem likely any time soon.
If the U.S. is talking about exporting oil, does that mean the country is energy independent?
No. The U.S. imports 25% less oil than it did five years ago. But foreign oil still makes up about half of the crude that U.S. refineries turn into gasoline, diesel, jet fuel and so forth. America doesn’t come close to consuming all of these refined fuels, which unlike oil can be exported, and ships much of them abroad.
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.
Why does Exxon want to end the export ban?
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.
Why can companies sell oil for higher prices outside of the U.S., and how much higher?
A barrel of oil sold in the U.S. used to fetch about the same price as an equivalent barrel sold internationally. But U.S. prices began sinking lower in 2011, as crude gushed from domestic wells faster than refiners could process it. Today, the going price for a barrel of U.S. crude is $97.50. That’s about $11 less than a barrel sold in Europe.
Who else would be in favor of exporting crude?
Other oil producers. Lifting the ban would allow them to find the best prices around the world.
Who would oppose exports?
Refiners, who like the abundance of U.S. oil, and the low prices they now pay for it. And maybe drivers, since cheaper crude oil translates into cheaper gasoline, which benefits consumers.
If the U.S. did allow oil exports, could that affect the global price of oil?
Possibly. The U.S. is overtaking Russia as the world’s second-biggest oil producer, behind Saudi Arabia. Sending those barrels onto the world market would add to supplies and take pressure off the price. In fact, the U.S. oil boom is already adding slack to the global market because the country is importing less crude. In theory, it’s possible exports of U.S. crude could lead to lower global oil prices and, by extension, lower gasoline and diesel prices.
14 Comments on "Exporting American Oil: A Primer"
BillT on Sat, 14th Dec 2013 11:34 pm
What a mountain of pure unadulterated bullshit! The Wall Street Journal is pimping for Big Oil more and more as the economy and capitalism heads for the destruction cliff.
mo on Sat, 14th Dec 2013 11:56 pm
Not a good idea especially when tight oil starts to decline in a couple of years and depletion really starts kicking in on the back end with conventional oil
CAM on Sun, 15th Dec 2013 12:52 am
My guess is that they really want to export natural gas which they can sell for 3 times the price overseas. Of course the result would be rapidly rising gas prices in the US. And, for crude oil the WTI price would quickly equal the Brent price making gas and diesel more expensive in the US. Let’s get real, the only reason the oil and gas industry wants to export is to make more money and that means more costly energy in the US.
Bob Inget on Sun, 15th Dec 2013 1:48 am
Currently we only export natural gas to Mexico and lately to Eastern Canada.
LNG IMPORT terminals are being reversed.
Permits to build new LNG terminals are in the works. There are no Federal restrictions on LNG exports.
Every day of the week we (US) imports
six to eight million barrels.
Canada also imports about seven hundred thousand Bpd on its East Coast.
In both cases imported crude is refined in North America and reshipped in clean hulls to South America.
Yes, exported crude is noted but also counted in US consumption now hovering around 20 Million B p/d
It’s not so much a matter of number of barrels but transportation. Some may have noticed a fuss being made over Keystone XL as example. THe US restricts use of foreign flag ships
between US ports.For instance, shipping Alaskan oil products to Hawaii can only be done with US flagged tankers.
If Exxon gets its way.. (Exxon ALWAYS DOES) Light crude can be shipped directly to Europe or South America.
The difference between West Texas Inter
and Brent was as much as $17. lately,
that has closed somewhat to $13.13, still a tempting target as a single tanker load could net an EXTRA eleven million $ per load at Friday’s close.
Of course if your instincts told you this is a bad idea, to export oil, you are probably not far off. As for gas,
its doubtful exports can be stopped.
Shell is building floating LNG terminals
in Korea. These are the biggest ships ever built and getting larger. Obviously
portable but intended for semi permanent
anchoring as far from shore as practical.LOading off shore goes around
local concerns. Implications for lost US jobs higher fuel costs as pointed out in a previous post are disheartening.
westexas on Sun, 15th Dec 2013 2:22 am
As a practical matter, while we are still importing about half of the crude oil processed daily in US refineries, it seems like a non-issue to me.
In any case, I think that the US oil industry is going to be lucky to just match the 2013 crude oil production rate 10 years hence, but time will tell.
rockman on Sun, 15th Dec 2013 3:39 am
Bear in mind that US consumers don’t buy oil…they buy refinery products. And there is no ban on exporting refinery products. I suspect the prime motive is that many foreign refineries, such as the ones in eastern Canada, can make a better profit margin with US oil production that’s becoming increasingly lighter. And a reminder again that there is no restriction preventing the export out of the US of every one of those Canadian 2.5 million bopd that is currently being shipped in.
SilentRunning on Sun, 15th Dec 2013 4:49 am
I’m *so glad* that the laws of physics have been overturned, and we can now produce *infinite* amounts of oil right here in the USA – FOREVER!!! Hurray!!
We need to pay no attention to the facts that the fracked wells in North Dakota deplete dozens of times faster than traditional oil wells – or that the very best spots were selected for drilling first.
Those ND oil wells will NEVER go dry! We’re saved!!!
Norm on Sun, 15th Dec 2013 10:12 am
Its not that they never go dry. Its that Jesus keeps adding more oil into the well, so it always stays full.
and we can drive a Cadillac Escalade to church on Sundays, forever.
BillT on Sun, 15th Dec 2013 1:19 pm
Didn’t we sell the oil we had for cheap over the last 100 years? Seems like we didn’t learn anything but greed.
eugene on Sun, 15th Dec 2013 2:48 pm
The US produces 7+ million barrels a day while consuming, last I saw, 20+ millions a day. Course the “figures” most use consider Mexican/Canadian oil as “our” oil so makes the figures look better. Definitely, we are not in the age of abundance.
From what I understand, US refineries are, mostly, heavy oil refineries so we want to swap our light oil for heavy oil to countries with light oil refineries. We won’t be “exporting” our oil, we’re swapping it for foreign oil. So much sweeter to think we are so fat on oil we can “export” it.
My question is “why do we have to be such damn liars”? My private answer is, in general, Americans don’t know enough to know they are being lied to.
Kenz300 on Sun, 15th Dec 2013 4:06 pm
WSJ — part of the NewsCorp, Rupert Murdoch agenda driven right wing propaganda machine……..
rollin on Sun, 15th Dec 2013 5:55 pm
I am very disappointed in Exxon-Mobil. Apparently they don’t control the government and are trying to beg public sympathy to help make more profit. A sad situation. 🙁
JD on Sun, 15th Dec 2013 11:55 pm
A few weeks ago “they” we’re telling us that the US is now producing more oil than they import. If the US consumes around 20 million yet only produces just over 7 million the basic math does not add up. Anybody have a better calculator than I do?? Does this figure include Canadian oil as well??
FarQ3 on Mon, 16th Dec 2013 5:31 pm
I’ve got a great idea!! Why doesn’t the US govt allow ALL of the US oil to be exported to big modern refineries that make their products cheaper than the US refineries. Then you can import ALL of your fuel products (like us here in Australia) and the refineries can be viewed for decades to come as some kind of morbid mothballed monument to rusting environmental disasters. Of course you don’t need a job and you like paying more for your fuel, some people (very few) will be even better off!
You, our brothers, just a big hole in the earth like Australia.