There may well be an element of wishful thinking in the prediction by DEPA that the US will achieve complete energy independence by 2020, it is after all in their interests to present the domestic energy production industry in the best light. But achievement of that goal is not outside the bounds of reality.
Between 2008 and 2012 crude oil imports dropped from 9.8 billion barrels a day to 8.4, while domestic production rose from just 5 million barrels to 7.4 million barrels. The picture back in 2008 was very different, and 40 years ago it was almost unrecognisable.Therefore, it is more than fair to question whether regulations created 40 years ago remain fit for purpose.
The ban on the export of US crude oil was initiated in response to the 1973 move by OPEC to restrict supplies of oil. Fearing an energy crisis, Congress implemented the Energy Policy and Conservation Act, which effectively legislated that all crude oil supplies would remain within domestic borders.
Calls to repeal outdated legislation
Today though, the picture is very different. Thanks in large part to the proliferation of shale gas over recent years, the US is closer to becoming self-sufficient in energy terms, than it is to being held over a barrel by a foreign power. As a result, there is a growing voice calling for the ban to be lifted.
Leading the charge for the ban to be repealed are the oil producers, driven by a desire to be able to sell raw, unrefined crude on the global market. Harrold Hamm, chairman and CEO of Continental Resources argued that due to the increase of oil extracted from horizontal drilling, so called shale oil, it has become lighter and tighter. His argument is that such levels of high quality product outstrip refinery capacity.
He said: "We need to make sure we don’t disadvantage this high quality oil with refining capacity, wherever it may be located in the world."
Are we running out of oil already or is the possibility of reaching the peak still several decades away?
Producers being unfairly treated
Keeping with the theme of how the energy mix has developed since the enactment of the ban, he proposed that producers are operating at a disadvantage when compared with other areas of the energy industry.
"The popular belief is that we’re not exporting petroleum. Nothing could be further from the truth. Major oil companies are exporting refined petroleum products like gasoline and diesel with no limitations. Why shouldn’t independent producers be allowed to do the same?" he said.
Unsurprisingly, the opposition comes from the other end of the supply chain, in the form of crude oil buyers. Graeme Burnett, senior vice president for fuel optimisation at Delta Air Lines, warned that removing the ban would only serve to ship jobs recently created by shale oil abroad.
He said: "The shale oil revolution breathed new life into these refineries and created jobs for thousands of refinery workers. By lifting the export ban and sending our crude overseas, we would reverse that trend."
Removal would ship jobs overseas
"Refineries in Europe – where there is currently excess refining capacity – would be more than happy to refine our oil using European workers to do so. Put simply, lifting the ban will benefit European refinery workers at the expense of thousands of American jobs." Burnett stopped short of ruling out the logic of removing the ban at some point, but argued that doing so before energy independence is closer to reality would be "ending the game after the first quarter".
Offering a foreign affairs perspective on the issue, Amy Myers Jaffe, executive director of energy and sustainability at the Institute of Transportation Studies, suggested that the ban runs contrary to the country’s position on free markets: "The US has for many decades been the leading nation in championing open markets and free trade in energy."
Exports boost global power
Jaffe cites the potential for energy restrictions to be a source of international conflict, the value provided to America by being able to prevent energy supply being used as a strategic weapon by others as key motives. She also proposed that by preserving barriers to foreign investment, the country risked causing supply constraints.
She said: "For these three reasons, the US should continue to actively support open markets and free trade in energy and to do so, it cannot restrict its own energy exports."
The growing tensions between the US and Russia over Ukraine have added weight to the foreign policy side of the issue. Joe McGonigle, former chief of staff at the Department of Energy, told Reuters: "Russian oil companies and the Russian state would view US energy exports as the chief competitor to one of their target customers – that being Europe."
Offshore-technology.com profiles the 10 biggest oil producing countries based on the latest production data.
While the recent escalation in US, Russia relations has added fuel to the debate on the export ban, the general consensus appears to be that whatever the outcome of the debate is, it won’t be rushed through, either by congress or by executive order from President Obama.
There are compelling arguments and powerful groups on both sides of the debate. But the choice facing congress, or in fact President Obama, is whether to rest on a protectionist policy borne out of fear, or invest further faith in the value of open markets.