Comment
0
Tweet
0
Print
RSS Feeds

American oil companies call for end to export ban

Wednesday - 1/8/2014, 4:52am  ET

FILE -This Wednesday, May 9, 2012, file photo, shows drilling rig near Kennedy, Texas. A growing push to allow oil companies to export some of the crude oil that is being produced in greater volumes domestically is sparking debate as 2014 nears. The ban on exports stems from a 1975 law passed after the nation suffered crippling shortages of oil and gas. (AP Photo/Eric Gay, File)

JONATHAN FAHEY
AP Energy Writer

NEW YORK (AP) -- 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.

   1 2  -  Next page  >>