When the United States lifted a four-decade ban on crude oil exports at the end of last year, the market wasn’t exactly primed to incentivize a surge in American oil sales abroad. But as CNN Money reports, crude exports have jumped sevenfold in the first three months of 2016:
…U.S. oil exports hit an important milestone in March, the latest month that statistics are available for. For the first time since 2000, the majority of U.S. crude exports were to destinations other than Canada, according to JBC Energy. The U.S. exported 15.7 million barrels of oil in March, with only 7.7 million of those barrels going to Canada. Japan and Italy were the biggest buyers, importing more than 1 million barrels of American crude apiece. […]All told, the U.S. exported 508,000 barrels per day in March. That’s not a ton considering America imported 8 million barrels of crude oil per day in March. But it’s also not an insignificant sum, making up almost 6% of total U.S. production that month. Many in the industry hope oil exports will play a bigger role in the future, providing a new market for all the shale oil being pumped.“We’re ready. When prices go up, U.S. crude is going to be more in demand,” said John LaRue, executive director for the Port of Corpus Christi in Texas.
One of the strongest arguments for doing away with the ban on crude oil exports—besides the fact that it remained an anachronism from a bygone era made all the more vestigial by our recent fracking-enabled surge in oil production—was the disparity between the U.S. benchmark oil price (the West Texas Intermediate or WTI) and Europe’s Brent benchmark. Surging American oil production from shale formations produced something of a domestic glut here over the past five years, creating pipeline bottlenecks and stretching our storage capacities, and because producers were unable to export that crude, WTI prices began selling at a significant discount to Brent, often by more than $10 per barrel.That placed American oil producers at something of a competitive disadvantage to producers abroad for the simple fact that they were making significantly less money per barrel of oil they drilled—an especially acute problem when you consider that shale projects carry relatively high operating costs. Exporting our crude would help to narrow this gap and put U.S. companies on a more level playing field, but even before we ended the ban the collapse in crude prices helped narrow that spread.Today Brent is trading at just over $1 more than WTI, a tiny premium that CNN notes isn’t enough “to justify the extra shipping costs involved with shipping U.S. crude long distances.” Still, American crude is now reaching every corner of the world, and providing buyers abroad with a stable supply of (fracked) oil.