The U.S. is considering
relaxing regulations that ban the export of crude oil, citing growing domestic
production of oil that isn't suitable for refining locally, U.S. Energy
Secretary Ernest Moniz said Tuesday.
U.S. oil production has
soared in recent years due to the use of new hydraulic fracturing technology,
which has unlocked the country's large oil- and shale-gas reserves. According
to the International Energy Agency, the U.S. will become the world's largest
oil producer by around 2020.
But U.S. law prohibits
most crude exports. That has caused some distortions in global and domestic
energy markets, and dampened the price of oil in the U.S. compared with the
rest of the world. With all that new crude, domestic bottlenecks have formed in
places like North Dakota, transportation hubs like Cushing, Okla., and most
recently, along the Gulf of Mexico coast, where much of the nation's refining
capacity is located.
In recent years, many
U.S. refineries there have geared their production toward processing heavy oil
from Latin America and Canada. Now, they are struggling to keep up with rising
supplies of light, sweet shale oil from places like North Dakota and Texas.
"The issue of crude
oil exports is under consideration…A driver for this consideration is that the
nature of the oil we're producing may not be well matched to our current
refinery capacity," Mr. Moniz said at a media briefing Tuesday after a
two-day energy conference in Seoul. He said a study of the subject, including
multiple agencies, is currently taking place.
Any discussions over
potential exports will likely be drawn-out and politically fraught. Many
industries have benefited from lower oil prices, and won't be eager to compete
with foreign buyers. Politicians will likely approach any change to policy with
caution.
U.S. oil prices climbed
as much as 0.8% in the four hours after Mr. Moniz's remarks to a two-week high
of $101.44 a barrel. The rise in prices occurred during a typically quiet time
for trading on the New York Mercantile Exchange.
The idea of exporting
crude has long been controversial in Washington, amid decades in which the U.S.
has boosted imports to meet its domestic energy needs. But amid a boom in
shale-oil production in the U.S. recently, imports have fallen, lessening worry
among export critics that it could weaken U.S. energy security.
Similar worry has in
recent years also clouded the debate over natural gas exports. Gas-intensive
companies, like chemical makers, have said exporting America's now-plentiful
gas could jack up domestic prices. But the U.S. has moved ahead with
sanctioning a number of large-scale gas export plans.
Any move by the White
House to allow for significant exports would require a change in law that, since
1975, has effectively banned them. U.S. producers do ship limited amounts,
mostly to Canada, but require special permits to do so.
Still, if the U.S. moves
ahead, even with limited new exports, it could significantly change global
markets, and affect pricing. Already, higher U.S. output has contributed to
steadier global prices by replacing crude imports that can now flow elsewhere.
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