It's Time to Remove the Prohibition to Export Crude Oil

It's Time to Remove the Prohibition to Export Crude Oil
The law banning crude oil exports prevents crude oil producers in the US from participating in free trade of a commodity that is traded worldwide, Alex Mills says.

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

The dramatic increase in U.S. oil production has produced tremendous benefits for Americans. The federal government, however, has constrained many of those benefits by limiting the ability to export crude oil. 

The law that prohibits the export of crude oil from the U.S. was passed by Congress in the 1970s during a time of crude oil shortages, rising prices and even lines to purchase gasoline. A majority of Congress believed that it was wrong to allow the export of crude oil when there are shortages and lines at gas stations at home.

Since then there has been a dramatic increase in oil production that has created an oversupply of oil in the U.S. Oil production in West and South Texas, and the lack of takeaway infrastructure, is causing an even larger oversupply situation at the lease level.

The backlog of crude has created a pricing differential between West Texas Intermediate (WTI) and other locations where crude oil is sold. For example, in London North Sea Brent crude oil closed at $60.55 per barrel on March 4. On the futures market for 30-day delivery at the New York Mercantile Exchange crude oil closed at $51.33. The posted price for WTI at the lease in West Texas was $47.00, and there are additional deductions for transportation among other things.

In the end it is a balancing problem between the massive growth in production of light sweet crude oil out of the Permian Basin and the Eagle Ford when matched with the Gulf Coast refinery capabilities. Most Gulf Coast refineries are configured for heavier sour crude. They are having problems refining the influx of sweet crude, and they are near their maximum capacity for light, sweet (WTI) and condensate. Yet, these lighter crude oil supplies are growing by the day.

Oil production in the Permian Basin has increased almost one million barrels per day (b/d) in seven years and more than 1.3 million b/d in the Eagle Ford, according to the U.S. Energy Information Administration. In 2008, the Permian Basin produced about 800,000 barrels per day b/d compared to 1.7 million b/d today. The Eagle Ford produced less than 300,000 b/d in 2008, but today it averages about 1.6 million b/d.


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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Floyd Burgoz | Mar. 6, 2015
Good luck with the current administration in Washington DC. Socialist minds do not have jobs in mind. They venture towards helping hands without consideration of where and how many apples fall from the lending tree of Joe Public.

Andrew B | Mar. 5, 2015
It should be considered very carefully before anything is decided with this. The world oil supply is not infinite. Access is not guaranteed off the continent of North America. Do we want to deplete our supply before Russia, Iran, or other adversaries. Do we want to be subjected to the same energy blackmail that Europe is now facing from Russia. Energy is not just fuel. It is power. USA needs to plan strategically for the next century. Not just profits tomorrow.

JOHN Cleary | Mar. 5, 2015
Should the USA benefit from the resources of the NA continent that taxpayers have leased to OIL companies , cheaper energy is better for all the CITIZENS OF the USA and increases jobs tenfold throughout all of the economy . It seems fair to me that AMERICANS get some benefit from OUR companies that the US military is there to protect worldwide. Who benefits the most,, foreign companies like Shell, BP etc and with all the tax breaks , this is the only way to have regular citizens receive a break from HIGHER gas and energy costs, accountants cook books on profits and spills , we need at least the law to be left inplace an unchanged


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