The United States has long been able to export coal, gasoline and natural gas, but now U.S. companies want to start exporting crude oil. Thanks to hydraulic fracturing of shale rock formations, America's oil production increased 15 percent in 2013, the fastest growth of any country in the last 20 years. Now the International Energy Agency predicts the country could become energy independent by 2020. With 2014 outputs forecasted to increase by 780,000 barrels per day from last year, some oil producers are pushing to lift the ban on U.S. oil exports. However, the strongest opposition to this change is coming from within the industry itself.
Crude oil is a liquid mixture of mostly hydrocarbons that exists in underground reservoirs that is created through the heating and compression of organic materials over a long time period. These hydrocarbons contain a lot of energy, which is why oil is used as a fuel source. Crude oil is unprocessed when extracted from the ground but is then refined into fuels such as gasoline and diesel. Historically, crude oil has been extracted through drilling, but the new technology behind horizontal hydraulic fracturing has allowed oil companies to extract oil from shale rock formations.
Currently, the U.S. strictly regulates oil exports, limiting the market for this new supply. The restrictions date back to the 1973 oil embargo, when Arab oil producers cut off exports to the U.S. to protest American military support for Israel. Oil prices in the U.S. skyrocketed and Congress decided that limiting exports of crude oil would stabilize prices and increase domestic energy production and supply. There are a few exceptions to the export restrictions, including oil delivered to Canada, oil from the Trans-Alaskan Pipelines, heavy oil from specific areas of California and oil that is specifically licensed for export by the U.S. Commerce Department.
With limited export options, oil companies are looking for new outlets for domestic production. Therefore, oil producers – companies that extract oil from the ground such as Exxon and Chevron – have suggested lifting the self-imposed restrictions, stating that decreased reliance on foreign oil would lower energy prices for U.S. customers. Additionally, crude exports would increase development of American oil resources and create more drilling jobs.
Industry leaders at odds over exporting
While producers zealously push for more outlets to sell oil, refiners do not share the enthusiasm. The disagreement between the groups ultimately comes down to money. Most of the surge in U.S. oil production has come in the form of light sweet crude. This type of oil is coveted by foreign oil refiners, while American refineries are tailored to process the heavy viscous crude oil that is imported from Mexico, Venezuela and the Middle East. If the export ban were lifted, U.S. refiners would have less bargaining power with American oil producers, who could sell their crude oil to a variety of other refiners around the world.
What is the impact on citizens?
If the export ban were lifted, some U.S. refineries would likely have to pay more for domestic crude oil. However, many of these companies already depend on much more expensive international crude oil, so the difference may be minimal. Some industry experts believe that lifting the ban will have a larger impact on individual refinery profits than consumer prices. There is currently no ban on gasoline and diesel exports, so U.S. prices for fuel are already set according to the global market.
One of the more direct impacts of the lifted ban on citizens would be the potential environmental implications. Unless restrictions are put in place, oil producers may pursue more oil deposits across the country to maximize export profits. It remains to be seen if the export ban will be lifted, but the Senate Energy and Natural Resources Committee plans to address the issue at a January 30 hearing, the first meeting on the subject.