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Lifting The US Crude Export Ban

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Lifting The US Crude Export Ban

Unread postby Pops » Fri 31 Jan 2014, 09:37:55

Since about 2005 when North Sea production began to decline, US refiners have been exporting more and more product in order to capture the higher prices overseas. Especially after the WTI/Brent price decoupled in about 2010 the exports have been rising dramatically.

For a couple of years now there has been an ongoing campaign to convince the public that we are in the middle of an "energy renaissance" here in the US. From TV ads to "Harvard Studies" to Diane Sawyer's gushes, the Saudi America bell has been ringing the ears of the dogs on Wall St and capitol hill.

This is a big deal as all of us on propane now know. The business of America is business and international oil companies are called "international" for a reason: said reason being their interests are not aligned with any national interest, but strictly institutional profit. If in fact whether their interest in profit actually goes in an opposing direction to the national interest is of no real concern as long as the direction is profitable.

So a thread to discuss the export ban.


From the front page, Time, Swamplandia
Lawmakers Mull Lifting Longtime Ban on Oil Exports

Public Policy
Lawmakers debated ending a decades-old ban on exporting crude oil overseas on Thursday, revisiting a restriction enacted at the height of America’s oil worries and seen by some as outdated amid a domestic energy boom.

At a hearing of the Senate Energy and Natural Resources Committee, lawmakers and policy experts weighed the price stability of oil in the United States, job creation, and national security considerations relating to the 1975 Energy Policy and Conservation Act. Created in response to the famous Middle East oil embargo and subsequent oil crisis in 1973, the law keeps all U.S. crude oil business within the country, while still allowing the export of refined oil and gases.

“We are witnessing an energy revolution,” said Louisiana Democratic Sen. Mary Landrieu. “That’s why we’re having this testimony today.”

Lawmakers and experts said improved technology, a weakened job market and the current “energy renaissance,” which includes a natural gas boom, are all reasons to reopen debate about lifting the ban and adding American crude oil to the global market. Congress remains fiercely divided over energy policy in general, making consensus on a legislative change difficult to reach. With modest aims, senators painted the hearing as just the start of a process.

“[This] is the beginning of many very considered and thoughtful discussions on what is a very timely issue,” said Alaska Republican Sen. Lisa Murkowksi, the committee’s top Republican.

Harold Hamm, chairman and CEO of the petroleum company Continental Resources, said the law was born of oil scarcity fears that no longer exist.

“Experts… agree we will be energy independent in terms of crude oil within a decade or two,” said Hamm, a proponent for lifting the ban. “Through technological breakthroughs in precision horizontal drilling, we can develop resources previously thought to be unattainable.”

Opponents of lifting the ban conceded oil shortages are no longer the problem, but said prices could rise if the country begins exporting crude oil, to the detriment of American consumers.

“Any oil sent overseas must be replaced, which could raise prices,” said Daniel Weiss, the director of climate strategy at the liberal Center for American Progress. “Oil produced in the United States is significantly less vulnerable to supply disruptions and therefore provides more energy security.”

Opponents noted that the OPEC oil cartel, whose embargo sparked the 1973 energy crisis, still produces about 40 percent of the world’s crude oil, according to the U.S. Energy Information Administration.

“The global market is influenced by an oligopoly where OPEC countries control production in order to set prices,” said Graeme Burnett, senior vice president of Delta Air Lines, who predicted OPEC would lessen its crude oil supply if the U.S. entered a global market in order to maintain high prices.

But Amy Jaffe, the executive director of energy and sustainability at University of California, Davis, argued that lifting the ban would dilute OPEC’s market share and therefore its power over prices. Proponents for lifting the ban also said doing so could create domestic jobs.

“The energy sector has added jobs for millions of Americans—both directly and indirectly through energy service and equipment companies,” Hamm said. “Lifting export restrictions will strengthen our domestic oil industry, a critical component of our economy.”
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Re: Lifting The US Crude Export Ban

Unread postby Subjectivist » Fri 31 Jan 2014, 09:47:20

Speaking for myself lifting the ban is a horrible idea. Not that I hink TPTB in Washington give to shakes of a lambs tail for what I think.
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Re: Lifting The US Crude Export Ban

Unread postby rollin » Fri 31 Jan 2014, 10:15:57

Let's get a little reality here folks, the US imports half it's oil. No matter how much the media touts an oil glut or renaissance it's just not true.
We import oil, refine it and send refined products to other countries.
When petroleum is refined (distilled) it produces fractions. Two of the major fractions are diesel and gasoline. The US uses a lot of gasoline but not a lot of diesel. So we send diesel to Europe and they in turn send us gasoline since they use a significant amount of diesel for transport. It's just a leveling of a physical process.
The import oil then export refined products keeps the refineries making more money and they stay open. The last thing we need is more refineries closing (at least before we actually start conserving fuel).

If we start exporting domestic crude while we still are an importer it is for a few to gain profit and put the US at an economic/energy disadvantage. Don't be hokummed by crafty business practices. The more we distribute oil and it;'s products the more money and energy that is wasted (in general). Some people see a profit in stupid methods, that does not mean we should proceed to hand them the right to do it.
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Re: Lifting The US Crude Export Ban

Unread postby Keith_McClary » Fri 31 Jan 2014, 12:32:12

rollin wrote:The more we distribute oil and it;'s products the more money and energy that is wasted (in general).
If the US was exactly self sufficient in crude but still allowed no exports (so no imports either), I think a lot more pipelines and rail/sea tankers would be needed to distribute oil from producing to consuming areas.
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Re: Lifting The US Crude Export Ban

Unread postby rollin » Fri 31 Jan 2014, 13:10:04

Keith_McClary wrote:
rollin wrote:The more we distribute oil and it;'s products the more money and energy that is wasted (in general).
If the US was exactly self sufficient in crude but still allowed no exports (so no imports either), I think a lot more pipelines and rail/sea tankers would be needed to distribute oil from producing to consuming areas.


If the US was exactly self-sufficient in oil, we would not need any extra pipelines, since we would be using what we produce now. If you think that the US can produce another 8 million bpd above what we are now, your dreaming. We would have to learn to use what we can produce.
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Re: Lifting The US Crude Export Ban

Unread postby Pops » Fri 31 Jan 2014, 13:26:22

A part of this is that US refineries spent a pretty penny reworking their outfit to use heavy oil, which they obviously thought was the future of oil. The last little bump of LTO has thrown a wrench into those plans I'd think so exporting the light oil would be a good thing for them
I stand to be corrected on any of that.

In related news the EPA could release the impact report on the KXL today which would bring down the heavy sorta-oil the refineries have been expecting.
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Re: Lifting The US Crude Export Ban

Unread postby Plantagenet » Fri 31 Jan 2014, 13:45:36

The White House just opened the door to allowing exports of US oil.

White House "willing to explore" export of US crude oil

O sure is full of surprises. 8)
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Re: Lifting The US Crude Export Ban

Unread postby ROCKMAN » Fri 31 Jan 2014, 16:24:38

"...for the first time (because of new technology) produce from "source rock", is a lie". True. I might be willing to cut him some slack if had qualified it as "significantly produced" but not even then. During the 90's the horizontally drilled and frac'd unconventional Austin Chalk was the hottest oil play on the planet with more wells drilled then they've poked in the Eagle Ford so far. There seems to be something of a trend in folks trying to rewrite history to support their positions. Rather difficult to get away with these days with instant www fact checking available.
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Re: Lifting The US Crude Export Ban

Unread postby Graeme » Tue 04 Feb 2014, 16:40:47

U.S. opens taps, a bit, on oil exports to Europe

The U.S. government has authorized limited crude oil exports to Europe, for the first time in years, raising new questions about how companies are testing the limits of a controversial, decades-old exports ban.

The Department of Commerce has granted two licenses to export U.S. crude to the UK since last year and another two to Italy, according to data Reuters obtained through a Freedom of Information Act request.

One application for German exports was filed in January and is awaiting a decision by the Bureau of Industry and Security (BIS), which is responsible for reviewing requests to export crude under a 1975 law that bans most shipments with a few exceptions, including sales to Canada and re-export of foreign oil.

These are the first permits for shipments to the UK since at least 2000 and the first to any European country since 2008, according to data from the BIS. The bureau has approved 120 licenses since January 2013, nearly 90 percent of which were for sales to Canada, the data show.

It was not immediately clear under which provisions BIS granted the European export licenses. The current regulation allows foreign crude to be re-exported from the United States if it is not commingled with U.S. crude, an option that some Canadian producers are said to be using.

In rare cases, the regulation permits the exchange of U.S. oil for foreign crude or refined products of higher value, which has become an attractive option with the growing surplus of light, sweet shale oil.

Whatever the case, the licenses could add to the growing debate in Washington on the benefits and pitfalls of lifting the ban, among the year's most urgent energy policy questions, as the relentless rise in shale oil production threatens to saturate domestic refiners as soon as this year.


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Re: Lifting The US Crude Export Ban

Unread postby ROCKMAN » Tue 04 Feb 2014, 16:52:18

And it turns out I've been greatly underestimating the amount of US oil shipped to Canada. We are now sending 200,000 bopd to our neighbors to the north. Or about $6.5 billion/year. And that's a tad less than the $7.5 billion of oil we're preparing to ship England, Italy and Germany.
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Re: Lifting The US Crude Export Ban

Unread postby Graeme » Mon 03 Mar 2014, 20:12:31

Lifting U.S. Crude Oil Export Ban Would Cook the Planet

A new analysis published today by Oil Change International entitled, Lifting the Ban, Cooking the Climate, shows that eliminating existing regulations on crude oil exports could result in additional greenhouse gas emissions equivalent to 42 coal fired power plants.

The analysis shows that allowing crude oil exports would eliminate a current price gap between the U.S. oil price benchmark and the global average. This increased price for U.S. crude oil on the global market would incentivize increased U.S. oil production on the order of 9.9 billion barrels between 2015 and 2050, adding more than 4.4 billion metric tons of carbon dioxide equivalent into the atmosphere.

“Removing the crude export ban would be a disaster for the climate,” said Stephen Kretzmann, executive director of Oil Change International. “President Obama and the U.S. Congress need to stand up to Big Oil and defend the current regulations if he is actually serious about addressing our climate crisis.”


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Re: Lifting The US Crude Export Ban

Unread postby ROCKMAN » Mon 03 Mar 2014, 20:50:45

Sorry Graeme. Utter nonsense IMHO. First, the oil patch (Canadian and US) has all the monetary incentive to produce every bbl of oil it can now: it's called $100/bbl oil. Second every bbl of oil bring produced today is being refined and burned...today. Does't matter where it's refined. But for sake of argument lets say those numbers are correct.

So what? The US govt fully supports the development, production, refining and importation of every bbl of oil possible despite all the evidence of GW. So why would it matter to the govt if exporting oil increased GHG production beyond record global levels?
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Re: Lifting The US Crude Export Ban

Unread postby Graeme » Mon 03 Mar 2014, 21:19:09

No, it is not nonsense. It is true that Obama has supported the o/g industry in the past but now he also faces the enormous responsibility of doing a lot more to combat climate change on many fronts. Maintaining a ban on US oil exports is one of these policies.
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Re: Lifting The US Crude Export Ban

Unread postby Graeme » Mon 03 Mar 2014, 21:21:45

No, it is not nonsense. It is true that Obama has supported the o/g industry in the past but now he also faces the enormous responsibility of doing a lot more to combat climate change on many fronts. Maintaining a ban on US oil exports is one of these policies.
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Re: Lifting The US Crude Export Ban

Unread postby Keith_McClary » Tue 04 Mar 2014, 00:46:59

ROCKMAN wrote:Does't matter where it's refined.
But doesn't whoever owns the refineries have control?
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Re: Lifting The US Crude Export Ban

Unread postby Pops » Tue 04 Mar 2014, 09:40:30

Graeme wrote:The analysis shows that allowing crude oil exports would eliminate a current price gap between the U.S. oil price benchmark and the global average.

Currently - this moment - the spread is $6.

Also currently, half the worlds rotary rigs are drilling already drilling US oil & gas 1,769 vs 1,325 (626 in Canada)

Since the US still imports 8MMbopd there is a lot of imports left to replace before we need to worry about exporting anything.
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Re: Lifting The US Crude Export Ban

Unread postby Tanada » Tue 04 Mar 2014, 10:27:40

Pops wrote:
Graeme wrote:The analysis shows that allowing crude oil exports would eliminate a current price gap between the U.S. oil price benchmark and the global average.

Currently - this moment - the spread is $6.

Also currently, half the worlds rotary rigs are drilling already drilling US oil & gas 1,769 vs 1,325 (626 in Canada)

Since the US still imports 8MMbopd there is a lot of imports left to replace before we need to worry about exporting anything.


This seems hopelessly optimistic to me Pops, if the world market will pay more than the Domestic market then they will export more aka import less until the prices are in tight sync. As you yourself point out we have been taking steps in that direction and the levels are about even right now. Does anyone know what the break even point is for transport costs of oil? Both the EU and USA are importers, as the world prices rises we can afford less and use less, but the consumers in the wings (Chindia) are taking up every drop of slack. If Trinidad suddenly started exporting 2 MMbbl/d and they did it at $95.00/bbl it would be absorbed without cutting the WTI or Brent price a dime.

While we might not technically be exporting more than we import we are already importing much less because of the costs and because of the LTO boom. I don't see a big cushion of oil forming because we are importing 3 MMbbl/d less than we used too, every bit of that 'extra' oil is being consumed right now at current prices. Back in the good old days if the USA had cut imports by 3 MMbbl/d the world oil price would have crashed and OPEC would have had to cut production to get the price back up. I see no evidence that old pricing structure exists any longer. Like Kopits said, we are now in a supply driven economy instead of demand driven when it comes to Petroleum.
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Re: Lifting The US Crude Export Ban

Unread postby Pops » Tue 04 Mar 2014, 11:54:40

Tanada wrote:This seems hopelessly optimistic to me Pops, if the world market will pay more than the Domestic market then they will export more aka import less until the prices are in tight sync.

I don't think I made a prediction, how can it be hopelessly optimistic? LOL

I was trying to make the point that the spread is only $6, down from $25 - so not much more narrowing is to be had. And in any case, the US & Canada are already employing 2/3 of the rotary rigs in the world and I have no proof but I don't think there will be any surge to employ any more for an additional $6: there are no locations to drill or they would be drilling them already.

Graeme's article ignores that supply is constricted by geology at this price, but not by 6 bucks. To be a little more blunt, I was being pessimistic, $6/bbl doesn't matter. $60 might but I doubt that would lead to an overall increase either, just the opposite.
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