A Review of the Nigerian Energy Industry

US hints at change on oil-export policy

US recoverable gas resources grows17 December 2013, News Wires – The chorus of voices calling for an end to a decades-old ban on most exports of crude oil from the US potentially gained a powerful ally when Energy Secretary Ernest Moniz characterised the federal policy as outdated.

The embargo took hold of US crude in the 1970s amid fears that disruptions from the Middle East shocked American consumers and threatened the national economy.

But times have changed as production from unconventional fields in places like the Bakken in North Dakota an the Eagle Ford in Texas have soared. By 2015, the International Energy Agency expects the US to surpass Saudi Arabia and Russia as the world’s largest oil producer.

These developments prompted Moniz to call on US officials to revisit the prospect of exporting oil.

“Those restrictions on exports were born, as was the Department of Energy and the Strategic Petroleum Reserve, on oil disruptions,” Moniz said at the Platts Global Energy Outlook, according to the New York Times last week.

“There are lots of issues in the energy space that deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s.”

Crude exports from the US are not strictly forbidden; the country currently exports just under 100,000 barrels per day, mostly to Canada, according to Energy Department data. Exporters must file for a license before shipments can begin.

The Department of Commerce is in charge of deciding the fate of the policy. And while the Energy Department is not directly involved, Moniz said it would be willing to produce technical analysis on the issue to help Commerce in making a decision, according to the New York Times.

Oil produced from US shale is not easy to process domestically because most refineries are designed to handle heavy crude that comes from Mexico and Venezuela. And customers in Canada like US crude because many grades trade at a discount to global benchmarks.

The opportunity to be “a part of the global system” of oil markets, as ConocoPhillips chief executive Ryan Lance put it last month, is too good to pass up.

“The world needs the crude and there are places around the world where we could export this light sweet crude into existing refineries,” Lance told a conference in Houston. But, he admitted, changing the policy would be “an uphill battle” politically.

ExxonMobil’s vice president of public and government affairs Ken Cohen told the Wall Street Journal earlier this month that the US must “rethink the regulatory scheme” holding back crude exports.

“We are not dealing with an era of scarcity, we are dealing with a situation of abundance,” he told the newspaper. In a follow-up editorial, the Journal called the existing US policy “an example of self-defeating resource nationalism”.

Proponents of lifting the export ban say such a move would help increase US production by opening up new markets, leading to more jobs and a more stable global oil price.

Those in support of keeping the embargo in place say the ban helps the US temper its dependence on imports from instable regions like the Middle East.

Democratic Senator Edward Markey called the movement to resume oil exports “a disturbing trend”.

“This oil should be kept here in America, to benefit our consumers and to reduce our dependence on imports from the Middle East,” he said in a statement.


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