The United States has not been an exporter of Crude Oil since the 1970’s, over 40 years. This past week, a discussion on this topic and its merits were discussed on the floors of the Senate.
Here were some of the comments bandied about:
“At a hearing of the Energy and Natural Resources Committee, Republicans said lifting the ban would decrease gasoline and diesel prices in the United States, add 1 percent to the gross domestic product, create a million jobs and improve the country’s standing internationally. The witnesses Republicans brought to the hearing assured them that fuel prices would actually fall.
Carlos Pascual, a fellow at Columbia University’s Center on Global Energy Policy, said gasoline prices are based on the price of Brent crude, an international benchmark. “If we are able to export light, tight oil from the United States, we add to the global supplies that contribute to that Brent crude benchmark,” he said. “As a result of that, we help drive down the international oil price that is tied to the price of gasoline in the United States and around the world.”
Here is what the American Petroleum Institute has to say on the matter:
“A new era of energy abundance, born of innovation, has created a once-in-a-generation chance for America to cement its future as an energy superpower,” said API President and CEO Jack Gerard. “But evidence is mounting that 70’s-era trade limits are damaging America’s economic potential. Study after study shows that blocking trade in crude oil harms consumers at the pump, the economy, and our trade balance. It also limits job creation, and it undermines America’s role as a global leader in energy.
“By opening the doors to trade, we can provide a counter to other nations that use their energy production as a geopolitical tool, even as we increase our own energy security. The economics of free trade are in America’s favor, and increased global competition for market share has only helped to put this issue into focus. Policymakers who support America’s future as an energy superpower have shown they are ready to act, and we urge the Senate to make this a top priority in the year ahead.”
I’ve read different theories about this aspect and I can’t say that one side or the other has me entirely convinced on the matter. That said, we have a lot of crude oil in this country…more in storage than at any time in our history. We’re producing oil at record rates, even considering the falling rig counts.
Some worry that we can’t sustain this production and if we ‘use it up’ then we’ll be back where we were in the 1970’s, under the thumb of OPEC.
The world is larger now than it was then (figuratively, related to crude production) and technologies have improved to where it’s not just the OPEC nations who swing a big stick. The crude oil they had (and have) is some of the easiest to extract…but other nations have incredibly amounts of known reserves. The ‘Peak Oil’ scares of the late 1990’s and early 2000’s is nothing but dust in the wind, renewable fuel development programs abandoned in the face of the Shale Revolution.
Part of me thinks that partially lifting the ban isn’t a bad idea…something to test the waters before going all in…limiting the amount of crude we’re willing to export but export enough to gauge its effects on the marketplaces we have concerns with.
Crude will always be a big topic on PropaneBuzz.com because of its direct impact on propane prices. Lower oil prices will mean lower propane prices, by and large, unless drastically lower (and sustained) oil and gas prices leads to a steep drop in production (say, natural gas) which then has the whipsaw effect of a market correction the other way….REMEMBER: these markets swing wildly to and fro…they rarely move in reasonable increments. Rather, they go from extreme to extreme.
We tasted the extreme highs last year. This year, we experienced an extreme drop, as crude oil tanked. As long as crude oil is range bound between where it is now and the mid $50’s, propane will probably stay in a $.10 to $.15 cent range. But please keep in mind (and I know this is repetitive, but it’s important), the world is one geopolitical move away from crude oil reacting sharply to the upside…at least for a time.
If I had to predict whether or not the United States will once again export crude oil, I would say yes, it will in some capacity. There are folks out there who believe crude oil has a lot farther to fall (such as in this article which talks about $10 crude, something last seen in the late 1990’s when I was just a few years into my career in propane). There are important and powerful entities in this country and abroad who would rather not see crude at such low levels. If the United States begins exporting crude, the supply glut we have right now will abate…and just how much production will be around when we get there is another factor on future supply and price.
There are also geopolitical aspects to a decision such as this…and I don’t think we’re going to see it any time soon…but I think it will happen within the next few years barring some global event that reminds us just how precarious and reactive energy prices are.