US set to allow crude oil exports after four decade ban
The US Commerce Department has given the go-ahead to several companies to export crude oil, a big policy change essentially ending a ban in place for the last four decades. At question is whether the end of the ban will mean higher prices at the pump.
Ultra-light oil, often referred to as 'condensate' by the energy industry, will be cleared to be exported abroad, according to a private ruling by the federal government impacting Pioneer Natural Resources Co. and Enterprise Product Partners LP, The Wall Street Journal reported.
Currently, the export of crude oil is restricted by the US
government, though the ban has not applied to refined versions
such as gasoline and diesel. The restrictions were put into place
during the 1970s as a direct result of the 1973 oil embargo
imposed by a number of Arab nations. At the time, global oil
prices were spiking upwards, and many Americans were struggling
to simply fill their car’s gas tank.
Exceptions to the crude ban – known officially as the 1975 Energy Policy and Conservation Act – have been made over the years, including for crude oil produced in Alaska’s Cook Inlet, oil that travels through the Trans-Alaskan Pipeline, certain fields in California, and oil shipped to Canada for domestic consumption. Still, even after all of those exceptions, the amount of crude being exported by the US amounted to a modest 67,000 barrels per day in 2011, reported the Washington Post.
At the same time, exports of refined fuels have gone up regardless of the crude ban, with US refineries shipping gasoline and diesel at record levels.
There has been mounting pressure from both energy companies and certain lawmakers such as Alaska’s Senator Lisa Murkowski to loosen the ban on crude exports, reasoning that it stifles domestic production.
Other lawmakers, however, argue that the crude export ban buffers the US from the market’s fluctuations. Sen. Robert Menendez (D-NJ) argued late last year that efforts to erode the export ban were focused on larger profits for energy companies, and that restrictions served to "protect US consumers from volatility and price spikes."
The latest push to end the export ban comes at a time when the US is experiencing rapid growth in domestic energy production due to shale fracking and newer drilling techniques. Regions such as North Dakota’s Bakken formation and Texas’ Eagle Ford formation are producing lighter types of crude oil, but are having a difficult time finding refineries in the US that can process it into refined fuels for export. That keeps the prices of such fuels low domestically, and is in turn good business for refiners who export it abroad with a markup, the Washington Post reported.
The latest move to allow the export of condensate will likely appease the newer producers in the energy market, while energy giants such as ExxonMobil and ConocoPhillips have also expressed interest in reworking the crude export ban.
"The world needs the crude," said ConocoPhillips CEO Ryan Lance in November. "And there are places where we could export that crude into existing refineries."
The big question left for US consumers is whether the lifting of the crude ban could lead to higher prices at the pump. Prices in the midwest of the country, for example, are currently depressed due to the bottleneck in refining the light crude – but exports could make that a thing of the past. Analysts are currently conflicted as to whether allowing exports would increase consumer prices or simply lower profits for refiners.