mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Shale Goes Global
US Inches Toward Exporting Crude Oil

Abundance has replaced scarcity as the chief driver of American energy politics these days, and that’s on full display in this week’s decision by the Commerce Department to permit two Texas companies to export a very light, minimally processed variety of crude oil. The ruling paves the way for Pioneer Natural Resources and Enterprise Products Partners to begin exporting what is essentially unrefined oil as early as August—the first time in nearly 40 years, since a ban on crude exports was enacted in the wake of the 1970s Arab embargo. The FT reports:

The US Department of Commerce, which controls oil exports, said in a statement there had been no change in its policy on crude oil exports. However, the minimal processing used by Pioneer could be emulated by other companies as a low-cost way to make their oil eligible for export.

This looks like a savvy political move. If this sets a precedent, it will give oil from America’s shale formations a potential outlet abroad, while circumventing—not overturning—America’s ban on crude oil exports. That ban is sure to be the subject of plenty of political grandstanding in the coming months, as fracking continues to reconfigure the U.S. oil trade balance.

We’ll be hearing plenty more on this subject in the run-up to this year’s midterms, and likely the 2016 presidential election. There are cases to be made on both sides; exports would provide an outlet for a growing glut of domestic crude and could stave off a dip in production, but would likely do so at the cost of raising domestic prices. That being said, one thing is for certain: this is the kind of problem we’d like to have.

Features Icon
show comments
  • Jacksonian_Libertarian

    I despise the interference by the Government Monopoly in the free market. It is never done in the best interests of the citizenry, no matter what the Politicians or Bureaucrats say. But rather for the accumulation of more power and opportunities for graft which such power affords.

  • PKCasimir

    This article doesn’t really explain exactly what action the Energy Dept took and its consequences. The Energy Dept allowed a type of light oil categorized as a condensate to be exported. The US produces about 250,000 barrels a day of this specific type of oil, which is refined into jet fuel and similar type products. Most of the oil produced through fracking is a light oil which most of America’s refineries are not able to process since they were designed to handle heavier oil. American oil producers are afraid that once America’s refineries are overwhelmed with light oil from fracking then the prohibition against the export of crude oil will leave them with no place to sell their oil. They are hoping that the Energy Dept has taken a first step in reclassifying the light oil produced by fracking as a condensate, thus allowing them an export market. Should the Energy Dept do that, however, it will inevitably raise the price of domestic crude and negate the advantage American refineries have in selling refined petroleum products on the world market. A more prudent course might be to encourage the building and/or expansion of American refineries to process this excess light crude.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service