backThe debate regarding U.S. restrictions on crude oil exports is escalating. Due to an increasing domestic supply of crude oil, primarily from shale oil production, a number of policymakers and members of the oil industry have called for a repeal of the restrictions. Some refiners, however, have opposed repeal, arguing that the country is better off keeping U.S. crude oil inside its borders. While it is unclear what changes to U.S. crude oil export policy, if any, will result from this debate, lifting the restrictions certainly would have a significant impact on the U.S. energy industry.
Congress passed the Energy Policy and Conservation Act in 1975, in response to oil shortages caused by OPEC's embargo against the United States put in place in 1973. The law directs the president to restrict U.S. exports of crude oil, with limited exceptions permitted. As Secretary of Energy Ernest Moniz said in December 2013, "[t]hose restrictions on exports were born . . . on oil disruptions." The U.S. crude oil supply today, however, is on the rise due in large part to increasing production in shale oil fields in North Dakota and Texas. The U.S. Energy Information Administration ("EIA") reported that, in October 2013, the estimated level of U.S. crude oil production was higher than crude oil imports for the first time since 1995. Furthermore, the EIA estimates that daily crude production in the United States will increase by 1 million bbls in 2014, and by an additional 800,000 bbls from 2014 to 2015. Increasing production and supply led Secretary Moniz to indicate that U.S. export restrictions, "deserve some new analysis and examination in the context of what is now an energy world that is no longer like the 1970s."
Proponents of repealing the restrictions argue that permitting crude oil exports will lead to increased production and, consequently, new jobs, economic growth, lower gas prices, and energy independence. In a recently released white paper on U.S. energy exports, Senator Lisa Murkowski explained another argument in favor of loosening export restrictions. The paper states that many U.S. refineries do not refine the "light tight oil" that comes from shale. The paper adds that producers are nervous that, at some point, this aspect of refining capacity will stunt domestic production: "rising light crude production will soon exceed not only the nation's light refining capacity, but also the ability of refiners to adapt to the new production slate. When this point is reached, the U.S. oil resurgence will collide with the de facto ban on crude oil exports."
On the other hand, Senators Robert Menendez and Edward Markey have been outspoken in their support of keeping the export restrictions in place. In a December 2013 letter to President Obama, Senator Menendez argued that lifting the restrictions would raise domestic oil prices and hurt U.S. consumers. Also in December 2013, Senator Markey responded to oil industry comments in support of easing restrictions by saying that the current export restrictions are "critical to national security" and that the "oil should be kept here in America, to benefit our consumers and to reduce our dependence on imports from the Middle East." Additionally, not all members of the energy industry support the easing of export restrictions. Refiner Valero Energy said in January 2014 that the restrictions "ha[ve] significantly reduced American dependence on foreign oil, kept U.S. refining utilization high, and insulated American consumers from geopolitical shocks."
Debate regarding crude oil export restrictions likely will increase along with domestic oil production. It is unclear when and if any changes to the export restrictions will occur as a result of this debate. It does appear, however, that any changes would take several years to enact.