16 July 2020

U.S. Considers Lifting Crude Oil Export Ban

Share This Story

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.

Click here for the full article in the Wall Street Journal.                                                      

Join Our Online Community
Join the Better Way To Retire community and get access to applications, relevant research, groups and blogs. Let us help you Retire Better™
FamilyWealth Social News
Follow Us