The Joplin Globe, Joplin, MO

National News

January 7, 2014

American oil companies call for end to export ban

CARTHAGE, Mo. — American oil companies have not been allowed to export crude for 40 years, but the industry wants to change that, even though the U.S. still consumes far more oil than it produces.

A surprising surge in domestic production of light, sweet crude — a particular type of oil that foreign refiners covet — has triggered growing calls to lift the restrictions, which were put in place after the Arab oil embargo of 1973.

But the idea is touching a nerve that remains raw four decades after oil shortages crippled the economy and led to the law that banned crude exports without a special license.

“For 40 years, energy policy has been shaped by that experience of the 1970s,” says Daniel Yergin, energy historian, author and vice chairman of the research and analysis firm IHS. “But we are in a different world. Neither our logistics nor our thinking has caught up with the dramatic changes in North America.”

Skeptics worry that lifting the restrictions would lead to higher gasoline prices and decreased energy security. Economists and analysts argue that it would have little or no effect on prices, largely because the U.S. already exports record amounts of gasoline and diesel, which are not restricted.

Some experts say allowing crude exports could actually improve energy security by encouraging more domestic production.

Major oil companies such as Exxon Mobil and ConocoPhillips, along with the American Petroleum Institute, an oil and gas lobbying group, are the biggest proponents of ending the ban.

On Tuesday, Alaska Sen. Lisa Murkowski released a paper on energy exports describing the nation’s export laws as “antiquated” and urging President Barack Obama and the Senate to allow crude exports. Late last year, Energy Secretary Ernest Moniz suggested at an industry gathering that it may be time to revisit export laws.

But easing the restrictions will be politically difficult, especially in an election year. In a recent letter to Obama, New Jersey Sen. Robert Menendez made an argument that is likely to resonate with voters: “Crude oil that is produced in the U.S. should be used to lower prices here at home, not sent to the other side of the world.”

Environmental groups have worries, too, mainly that by allowing U.S. companies to export crude to get higher prices, producers will be able to afford to go after oil deposits that require more elaborate, more environmentally damaging techniques.

That the nation is talking about exporting oil at all is a result of a huge turnaround in domestic production in states such as North Dakota and Texas. The U.S. is producing more crude oil than it has in 25 years, and the government predicts production will approach its 1970 peak of 9.6 million barrels per day in 2016.

That’s still not nearly as much as we consume. The U.S. still imports an average of 7.5 million barrels of crude every day, more than any other country but China.

The issue is that refineries around the world have spent billions of dollars to gear up to process specific types of crude oil they expected to receive. But a boom in U.S. production put the global refinery system “out of whack,” Yergin says.

In the U.S., refiners expected to import more crude from Venezuela and the Middle East, a relatively thick oil that is high in sulfur and known as heavy, sour crude. Many refineries abroad can more easily handle light, sweet crude, which is thinner, lower in sulfur and easier to refine into gasoline and diesel.

But in a surprise, U.S. drillers are producing so much light, sweet crude that U.S. refiners can’t use it fast enough, and a relative glut has emerged. U.S. oil prices are lower than global oil prices by $10 per barrel or more. Foreign refiners would be willing to pay full price for that crude if U.S. producers were allowed to sell it.

Refiners and others worried about domestic fuel prices say allowing exports would raise costs for the industry and for American consumers. If U.S. refiners lose the price advantage they have enjoyed, refineries might produce less fuel, invest less in the U.S. and hire fewer people.

“It’s a jobs issue,” says Bill Day, a spokesman at Valero Energy, one of the nation’s biggest refiners. “The Gulf Coast of the U.S. has become a refining hub for the rest of the world. That keeps American refineries open and American workers on the job.”

But it’s not that simple, others say.

If the ban were lifted, some U.S. refiners would probably have to pay more for American crude, but many U.S. costal refiners already depend on more expensive international crude. And eliminating the ban could lower costs for other refineries.

Lifting the ban, experts say, is likely to have a bigger effect on individual refinery profits than on consumer prices.

“It probably doesn’t change the retail price at the pump, but it may change the incentive for refiners,” says Kevin Book, managing director at ClearView Energy Partners.

Because there is no ban on gasoline and diesel exports, the price of fuel for U.S. consumers is already set on the global market, even if crude oil prices are not. U.S. refiners take full advantage of that. They exported a record average of 2.7 million barrels of fuels per day last year through October, making petroleum products the nation’s top export.

U.S. oil producers say allowing crude exports would help spur further development of American oil resources, create more drilling jobs and increase the nation’s energy security.

“It runs against the conventional wisdom about what oil security means,” says Michael Levi, director of the program on energy security and climate change at the Council on Foreign Relations. “Something seems upside-down when we say energy security means producing oil and sending it somewhere else.”

In the meantime, several companies aren’t waiting for policymakers to settle the debate. At least five are developing simple refining projects along the Gulf Coast to process light, sweet crude just enough to create petroleum products that can be freely exported to foreign refiners.

“It’s not a sleight of hand,” says Tom Kloza, chief oil analyst at the Oil Price Information Service and Gasbuddy.com. “When you have a ban or restrictions, you get opportunity and improvisation.”

 

1
Text Only
National News
  • Auto Show Nissan Hot _Cast.jpg Hot models at this year’s New York Auto Show

    With more than 1 million visitors annually, the New York International Auto Show is one of the most important shows for the U.S. auto industry.

    April 16, 2014 3 Photos

  • Court to weigh challenge to ban on campaign lies

    As political campaigns begin to heat up, the Supreme Court is deciding whether false accusations and mudslinging made during an election can be punished as a crime.

    April 16, 2014

  • Transportation Blues 2.jpg Congress is giving states the transportation blues

    On the road in a tour bus this week, the U.S. transportation secretary is spreading some bad news: the government’s Highway Trust Fund is nearly broke.

    April 15, 2014 2 Photos

  • Report: Russia withheld intel before Boston attack

    A yearlong review of information the U.S. intelligence community had prior to the Boston Marathon bombing found that the investigation could have been more thorough.

    April 11, 2014

  • Obama Health Secretary.jpg Obama announces Sebelius resignation, successor

    President Barack Obama praised outgoing Health and Human Secretary Kathleen Sebelius for helping to steer his health care law’s comeback after a rocky rollout, even as he nominated a successor aimed at helping the White House move past the political damage.

    April 11, 2014 1 Photo

  • Police seek driver in deadly Florida day care crash

    As mourners trickled by Thursday to honor the 4-year-old girl who was killed and 14 others injured in a crash at a Florida day care, authorities scoured the state for the driver they said fled in the vehicle that caused the fatal wreck.

    April 10, 2014

  • Stephen Colbert-Late _Cast.jpg Stephen Colbert to replace Letterman on late show

    CBS moved swiftly Thursday to replace the retiring David Letterman with Comedy Central’s Stephen Colbert, who will take over the “Late Show” next year and do battle with Jimmy Fallon and Jimmy Kimmel for late-night television supremacy.

    April 10, 2014 1 Photo

  • Civil Rights Summit.jpg Reflecting on progress, Obama honors civil rights

    Barack Obama was 2 years old when Lyndon Baines Johnson sat in the East Room of the White House with Martin Luther King Jr. and signed the Civil Rights Act, putting an end to an America where schools, restaurants and water fountains were divided by race.

    April 10, 2014 1 Photo

  • House passes Ryan budget with big cuts

    The House on Wednesday passed a GOP budget blueprint that promises a balanced federal ledger in 10 years by making sweeping cuts across the federal budget and eliminating health care coverage under the Affordable Care Act.

    April 10, 2014

  • Gay Marriage Utah_Cast.jpg Gay marriage’s win streak tested in higher court

    The gay rights movement’s winning streak in same-sex marriage lawsuits faces its biggest test yet in Denver where a federal appeals court will weigh whether to give an important victory to gay couples’ right to marry or halt their momentum.

    April 9, 2014 1 Photo