Talk on the US Crude Export Ban Heating Up

Talk on the US Crude Export Ban Heating Up

Feb 23, 2015 | Oil & Gas, Regulations

In 2014, if you entered “crude export ban” into a search engine, it generated pages of recent news stories, white papers, and editorials on the topic as it relates to the United States. “Cheap gas could kill U.S. oil export ban,” said CNN. The Aspen Institute published a white paper on how lifting the ban would affect U.S. manufacturing. And energy policy researchers Jeremy Martin and Alexis Arthur, writing for the San Diego Union-Tribune, announced “It’s time to lift the crude oil export ban.”

The ban on U.S. crude oil exports came about after the 1973 Arab oil embargo and ensuing high prices worldwide, largely as a method of insulating the country from volatility in the crude oil markets. Additional measures were put into place to create the Strategic Petroleum Reserve of oil storage sites meant to decrease dependence on imports. Yet the energy situation has changed since then, with OPEC producing less of a share of crude and countries like Brazil and the U.S. ramping up production. In fact, production is so high in the U.S. — due to the rapid rise of new drilling techniques such as hydraulic fracturing and hydraulic drilling — that the 1970 production record of 9.6 million barrels per day could soon be surpassed.

This new production environment and a marked drop in crude oil prices in 2014 have led many to call for the U.S. government to re-evaluate the 40-year-old ban. Many against the ban state it has not been effective as intended. Others like the previously mentioned Aspen Institute believe manufacturing (and thus economic) benefits could be significant with the ban lifted. Yet some are calling on the government to be cautious with its approach, with experts in various fields having told the House of Representatives Committee on Energy and Commerce on December 11 that more data is required before a decision can be made.

National economy aside, another concern is industry economics. Most U.S. refinery infrastructure is tailored towards heavier crudes, not the light crudes currently being produced. That takes money to upgrade infrastructure. It also prompts the question of whether or not subsidies on light tight oil (LTO) production would be necessary. What’s more certain is that however supporters and detractors approach the ban discussion, many questions still remain, prompting further discussion.