American oil companies call for end to export ban

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.
AP Wire
Jan 12, 2014

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."

Comments

Say no to new taxes

We need a ban on gasoline and diesel exports, not lift the one on crude.

retired DOC

Gas just took a $.30 jump 4 days ago. The excuse was refinery problems. We need more refineries. Then IF we have too much production that the price of gas settles lower THEN maybe allow some exports.

Vladtheimp

Exactly - environmental extremists fight to keep new refineries from being built; fight more fracking that is responsible for the new huge supply of environmentally superior light crude(without any demonstrable environmental impacts); fight building the Keystone Pipeline to import clean Canadian sand oil; fight gaining independence from Middle Eastern oil; fight increased production of oil from federal lands; are committed to killing the coal industry; and generally oppose policies that would provide good jobs, in many cases union jobs, which result in continued high cost of energy and dependence on foreign oil.

We may be retired but we ain't dumb. . . .

Lanivan

I suppose you ain't dumb, but you sure do blow smoke. Virtually every point made in your sentence? paragraph?....For the sake of brevity, I would like to address two:

New refineries. From Forbes: But to suggest that the refinery closures, over these many years, are the result of government regulations—EPA or otherwise—is ridiculous. They closed because the higher prices of oil combined with the lowered demand for oil worked to make these refineries unprofitable for their owners.

Refineries have been shutting down in this country for many years now. Indeed, the number of refineries in the United States dropped from more than 300 in 1982 to about 150 in 2009—well before Barack Obama took office and brought his EPA Administrator with him. Indeed, at one point in the presidency of George W. Bush, during a period when demand was on the rise, the closures of refineries had grown so severe that President Bush offered up military bases we were no longer using as locations for oil companies to build new refineries.

Not surprisingly, when the demand for gasoline decreased during the Obama term—as a result of the recession coupled with America’s continued drive to lessen its dependency on oil (as discussed in Part I)— more refineries shut their doors.

Cleaning up Canadian tar sands oil is a huge, costly, and complex proposition, and putting the onus on the Obama Administration and the EPA especially is rediculous: Alberta, which contains the vast Athabasca oil sands deposits, has committed over $1.2 billion to two world-class CCS projects meant to capture, transport, and store carbon dioxide usually emitted during the oil sands production process. One project will be at a large processing facility run by Shell, and another will connect multiple capture sites to operations that will use the captured carbon dioxide to recover hard-to-reach oil, a process called enhanced oil recovery.

Oil sands production is fairly greenhouse-gas intensive, emitting between three and 4.5 times more carbon dioxide per barrel than does the production of crude from conventional sources in the U.S. or Canada. The industry is currently responsible for between 40 and 50 million metric tons of carbon dioxide every year, or around 7 percent of the nation’s total emissions. “When you look at the makeup of this province’s emissions, CCS is a key technology,” says Mike Fernandez, executive director of sustainable energy for Alberta’s energy ministry. Fernandez says the goal is to be injecting and storing 2.76 megatons by late 2015, and 139 megatons by 2050.

Google - MIT Technology Review, Can Carbon Capture Clean Up Canada's Oil Sands?

Vladtheimp

Try addressing "new refineries" not the closing of old ones.

Try addressing the actual issues surrounding the approval of the Keystone Pipeline.

Try addressing the comment I made rather than spewing your cribbed talking points.

bigdeal

I have written an application to build a new oil refinery here in Grand Haven. I want to put it right on the Grand River, maybe buy the sand mining operation in Ferrysburg. Good place for any water wastes. I believe it would increase home values and increase the tourist industry here. People would come from all over to smell the smells, and see the lights at night. Next, I am applying for a nuclear power plant here.

Operating since 2010, the original Keystone Pipeline System is an 3,461-kilometre (2,151 mi) pipeline capable of delivering up to 590,000 barrels/day of Canadian crude oil to U.S. Midwest markets and Cushing, Oklahoma. You must be thinking of the Keystone XL project running to Texas. More money for the oil barons in Texas? They need Canadian oil in Texas?

Which one of your comments? There are sooooo many to choose from.

Lanivan

#1. New refineries: If you had read the Forbes article you would see that whether you are talking about closing old or building new, it's all about Free Markets, supply and demand, cost-driven. Not much to do with Obama/Administration/EPA - but everything to do with PROFITS.

#2. I was addressing the "clean Canadian sand oil" part of your "Fight building the Keystone Pipeline to import clean Canadian sand oil" sentence. Clearly there is nothing "clean" about Canadian sand oil, and it is a major project to make it so, as I pointed out with the MIT Technology Review article. So you're calling the MIT Technology Review article "cribbed talking points"? Really?...MIT? Wow.

#3. While I'm at it, none of your other cribbed talking points reflect the realities of current US oil/gas production, or EPA impact. It might be time to seek out new, updated information.

truthhurts

#1. are you saying that oil is not profitable? there is clearly something else hanging it all up!

#2. MIT also did a study that said the "Study of Liberal Arts is More Valuable than Learning a Trade." But i would not expect anymore from a person that believes and accepts everything they read.

#3. every one of the points made have to do with oil/gas production/EPA...or did you read something different?

no other country in the world gives a rats as about the environment, so why should we when it is costing us more money than we have...or don't have.

Lanivan

#1. I'm saying, to quote from my previous comment: "They closed because the higher prices of oil combined with the lowered demand for oil worked to make these refineries unprofitable for their owners.

Refineries have been shutting down in this country for many years now. Indeed, the number of refineries in the United States dropped from more than 300 in 1982 to about 150 in 2009—well before Barack Obama took office and brought his EPA Administrator with him. Indeed, at one point in the presidency of George W. Bush, during a period when demand was on the rise, the closures of refineries had grown so severe that President Bush offered up military bases we were no longer using as locations for oil companies to build new refineries.

Not surprisingly, when the demand for gasoline decreased during the Obama term—as a result of the recession coupled with America’s continued drive to lessen its dependency on oil (as discussed in Part I)— more refineries shut their doors." Forbes.com

#2. MIT is the acknowledged leader of technology education and research in the world. Let's not disparage one of the most respected technology sources anywhere on Earth just because the information doesn't jibe with the propaganda we have absorbed over the years.

#3. I read the same thing you did. Vlad's talking points are not grounded in reality. If you actually read unbiased information, you would understand where I am coming from. There are many things happening in the oil/gas production/EPA that are not typically understood or even recognized by us - the average citizen, and that show that the current reality does not match up with the outdated talking points.

Case in point= You think no other country cares about the environment. Not true - most all developed countries have spent billions on pollution and environmental controls, and on energy renewables investments. China has just recently increased environmental/pollution investments by $490 Billion (US dollars) to their 5-Year Plan, increasing government funding 40% from the previous 5-Year Plan to a total of 10 Trillion (Chinese dollars).

The US (and the world) is in the midst of a 3rd Industrial Revolution that is based on the Internet and Energy Renewables technologies as the major drivers of investments, research, growth and development of our economy, our financial institutions, and society (jobs).

truthhurts

ok.
China may say that they are 'investing' 490B in environmental/pollution investments, but once again...thats bull. If you believe everything a communist country says they are going to do, well thats crazy. Second, are you aware of all the little things that happen in china that goes under the radar that we can't do here...b/c of the epa? heck we send work over there just to get around the epa...so china saying they to are investing in energy is nothing more than comical.

Citizen

I would much rather restrict imports (through embargo or tariff) of goods from countries with environmental standards that do not meet ours, instead of lowering our standards to meet theirs. And yes, I'll be ok with buying less stuff once the prices rise accordingly.

truthhurts

and what do you know, we don't do either! rather we actually give them more manufacturing b/c its cheaper. Out of sight out of mind, except it costs us trillions in lost manufacturing and the world is not cleaner than it was yesterday. Economically brilliant

Citizen

We, the people, lack the discipline to create the economic case against importing goods created through abuse of the Earth or its People. The fact that the same is true for domestic goods caused the creation of regulatory agencies like EPA and OSHA. Why do we restrict our own manufacturers and not those in our creditor nation?

Lanivan

"Why do we restrict our own manufacturers....?" Are you referring to the manufacturers that are currently making the greatest profits in recorded history; the existing firms that are job destroyers, losing a net average combined $1 million jobs/years; or the thousands of US new start-ups, the high-growth entrepreneurs who create an average net jobs around 3 million a year.

US manufacturers invest jobs, plants, and money into China because of their rate of return on investment, period. The EPA has nothing to do with it. I'm curious what you think the reaction would be to Federal legislation disallowing investment in high-polluting countries such as China. Or demanding China clean up its act before we wheel and deal with it.

Citizen

I think the reaction would be loud - by lobbyists. The high hike in prices will be used as to stoke the reaction on the part of consumers.

If you are asking my opinion about the two options you present - I am all for them. I won't pretend to understand the "geopolitical" ramifications of doing so, which would probably be ugly.

As an environmentalist, I am fine with the restrictions on American businesses in terms of what they can put into our air, water, and land; what bothers me is that we allow it to happen elsewhere in the pursuit of that rate of return (and of cheap consumer goods).

Maybe I worded it clumsily, but I'm arguing AGAINST loosening our standards to make us more competitive.

Lanivan

Now I understand. I'm used to debates that revolve around the EPA being the big bully that keeps manufacturers from their full potential, and must be demolished post haste. Hence my hyper-sensitive response to your post. We're on the same page, and I should be the one to offer a mea culpa.

Citizen

As usual I respond before forming all responses.

I will say that the EPA does have something to do with it. The EPA makes it more expensive to operate because it requires responsible stewardship of our natural resources. I don't think that is a Bad Thing, but without similar restrictions on imports, those imports are a much cheaper alternatives, creating an incentive to buy goods that are cheaper because they were produced more cheaply (less environmental care to be taken; less care for the workforce as well). Weakening the EPA is not the solution, but the situation is thus.

Lanivan

You are mixing metaphors. We are talking about the oil/gas industry calls to stop the banning of exports without the required licensing. I don't like how we are hard-pressed to find anything that isn't made in China anymore; how many US jobs, plants, and investment money has been plowed into China; how the global power structure has shifted from the Mid-East to Asia. We deny or ignore this reality at our own peril.

ALL OF THIS contributes to the explosion of wealth inequality in the US, and the stagnation and chipping away of the middle class. Corporate America, reaping the most profits in recorded history, wants us to blame the EPA for this. They think we're dumb and ignorant.

And China is indeed investing heavy in pollution control and the environment - it is the heaviest polluter in the world, large swathes of the country are literally dying, and they are getting hugely bad press for it. I have talked to some of my friends who travel to China for business, so I have some reliable info about what goes on in China....you might not care to answer this, but I wonder if you travel there as well?

Citizen

You weren't asking me, but I've been there twice, and what goes on in Pudong, Shanghai (a typical business destination) may not give the typical business visitor a good look into the environmental situation throughout China.

In addition to Shanghai, I have visited (for leisure) a very rural location 3 hours away by commercial plane, where a childhood friend was involved in a business venture, part of whose goal was to teach the locals why they shouldn't be throwing their plastic bags into the river. You should see some of the vehicles being driven around those parts - they weren't all equipped with catalytic converters, to say the least.

That the central government is putting money into the problem is to be lauded (giving them the benefit of the doubt regarding the veracity of the information), but to suppose that the environmental impact of all economic activity in China will be comparable to that in the United States within our lifetime would be a stretch.

I can't speak to the labor conditions there, except that one of my visits (2010 or 2011) coincided with the installation of people-catching nets around the dormitories at some Foxconn factories.

This is my non-expert opinion; your friends might have better insight through their areas of business.

The Pudong half of Shanghai is indeed very clean and new (aside from the smog that prevents the sun from shining to the ground for weeks on end.)

Citizen

I need to add a much more subjective observation - that of my own mindset when traveling there. The development going on in China (social at least as much as economic) is staggering and exciting. It was inspiring to be part of it, in some small way, at first. However, once the excitement wore off a bit, it began to feel just like a developing market that Western businesses, and indeed individuals are clamoring to exploit. The cynicism is strong with this one.

Lanivan

Many thanks for taking the time to share your personal and professional insights, Citizen. Very interesting, and they do coincide with other observations I have heard. They do tend to support my declarations in this forum that energy, energy renewables, pollution control, and environmental concerns are, beyond the obvious social responsibilities, globally Big Business, a major reservoir of massive amounts of investment and R & D, and, not to beat a dead horse, the major driver of the 21st Century Machine Age.

Citizen

It'd be interesting to share tales with the others you've talked to. I've spent 4 weeks there, in total, so by no means do I have any expertise there - nor was I directly exposed to manufacturing facilities, for example.

I agree that the world economy is undergoing a revolution, as you describe. My only point of potential disagreement is that I highly doubt China will be on par any time soon with the standards we hold ourselves to, and that this means a very real competitive disadvantage that we have done nothing to counter. I am all for restricting international trade based on those reasons. I do a poor job of seeking to 'buy American', but if the market presented that as the only option, I would be happy to adjust ("sacrifice", to use the term loosely) accordingly.

Lanivan

I wonder what you think of Obama's approach of being tough on China on certain issues (national security, opening up Internet in China, China investment in US wind farms, etc) while balancing traditional US Open Markets?

Citizen

I think they are good gestures, but I think the Chinese are smart and savvy and will gain technology through other avenues; economically I think the consumer goods market dwarves the actions that can be taken on e.g. wind farm investment. But to a large extent, I have to confess ignorance on these specific measures.

Are open (international) markets really traditional in the U.S.?

Lanivan

Well, I guess we have Nixon to thank for opening up the doors to China, and the eventual open-trade policies it led to. Not having the time to look into it at the moment, I would say yes, the US does have an open-trade policy with most of the world (with some restrictions regarding exporting/importing, of course) - and probably has had for many years. Maybe couching it as "traditional" is a stretch. In terms of national defense, sanctions in the form of closing off or restricting those policies carries a lot of clout.

truthhurts

i have been there and my eyes still burn! i don't see china changing.

Lanivan

Interesting. So you don't believe the reports of hundreds of billions of China currency being invested in the 5-Year Plan, as reported? Or you think appreciable change would be too much a massive undertaking, and China doesn't give a fig? If I might ask - what was your personal observation when in China? I have heard that there is a huge push by the urban citizens to become more Westernized - thoughts? I know you are private, so understand if you don't answer.

truthhurts

china investing in anything that doesn't have a return is a joke. They probably are saying that so they don't get sactioned b/c they are a filthy dirty culture (at least the urban chinese are). If china doesn't care about its citizens (i mean people) what makes you think they are going to care about the environment? Yes, their people want to be like us as well they should, but it will never happen or come even close under communist reign. We are the greatest nation in the world and I would live no where else!

For what its worth, i think we do need the EPA and all that crap, but we need to use the resource wisely and use it in a manner that does not work against America and provide profit to others who abuse the worlds resources. AND implement realistic strategies and goals, but not operate like a communist party and we are its people.

Lanivan

It's the super-dense urban mass thing that bothers me. For what it's worth, I like and agree with your comment re: the EPA.

Vladtheimp

Can't blame the women for the urban mass thing in China - but it's Republicans who are waging the war on women . . . .

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