Per the Christian Science Monitor:
Oil export ban 101: Why does US have it? Why is it now easing?
Since 1975, Congress has sought to keep domestic crude oil at home, for use by American consumers. Signs are afoot that the Obama administration is ready to ease the ban and let some oil be exported. Here are the basics.
(http://www.csmonitor.com/var/ezflow_site/storage/images/media/content/2014/0625-oilexport/18646736-1-eng-US/0625-oilexport_full_600.png)
Washington — The US Commerce Department is allowing two energy companies to export a lightly refined petroleum product – a move seen by some as a first step toward the possible lifting of a longstanding US ban on crude-oil exports.
The move symbolizes a new era in which the US feels rich in domestic oil reserves, some industry analysts say. But it doesn't necessarily mean the floodgates are about to open for crude oil to flow as freely outbound as inbound.
Here's a primer on the petroleum export ban, the Obama administration's new step, and what the debate over the ban means for consumers.
Think back to those images of soaring gasoline prices and long gas lines in the 1970s, when an embargo by Arab nations shook the global economy. Congress approved the Energy Policy and Conservation Act in 1975, which sought to promote domestic fuel production and efficiency and created a Strategic Petroleum Reserve for emergencies. It also codified the notion that US-produced crude oil shouldn't be exported.
What exactly is banned?
The ban applies to crude oil, not refined petroleum products. Even then it's not a total prohibition. "Exports of crude oil to Canada are allowed as long as the oil is used there, as are exports of Alaskan oil using the Trans-Alaskan pipeline and small amounts of specific heavy Californian crude oil," Brookings Institution scholars Tim Boersma and Charles Ebinger wrote in a January report.
Companies can also request exemptions that are in "the national interest," but the Brookings energy experts say the overall policy has discouraged exports of crude while allowing shipments of refined products to reach 1.7 million barrels per day in 2012.
What's the change now?
Two companies sought permission to export a minimally processed form of ultralight oil, called condensate, and the Commerce Department approved the idea, The Wall Street Journal reported Tuesday. Condensate can be turned into gasoline or other fuels.
For these two firms (Pioneer Natural Resources Co. and Enterprise Products Partners LP), the approval means they can export a product that has generally been subject to the ban. The Obama administration said Wednesday that its overall policy remains unchanged, but Energy Secretary Ernest Moniz has hinted that change may be coming.
"The issue of crude oil exports is under consideration," Secretary Moniz said in May. "A driver for this consideration is that the nature of the oil we're producing may not be well matched to our current refinery capacity."
Why is lifting the ban coming up for discussion?
The question isn't new, but what's changed in the past few years is the deployment of hydraulic fracturing ("fracking") technology that unlocked oil reserves held in shale deposits, notably in North Dakota and Texas. The US still imports a lot of oil, but the fracking revolution has lessened the psychology of energy "dependence" and hoarding domestic production.
The condensate approved for export comes from Texas shale oil.
What's the case for fully lifting the ban?
The petroleum industry generally supports the move as a step toward free trade, in which different kinds of oil products can find their way to where demand is greatest and shipping is most efficient.
In particular, US refiners are mostly adapted to process "heavy" forms of oil, while the lighter shale output might find its best home overseas. "Allowing exports would enable light-oil producers to get world market prices, and their revenues would flow back into higher investment in [domestic] production," energy experts Daniel Yergin and Kurt Barrow wrote recently in a Wall Street Journal commentary.
Some energy analysts argue that gasoline prices would fall. "Lifting the ban would boost crude oil production and improve the efficiency of global refinery operations," thus bringing US gasoline prices down by 2 to 5 cents per gallon, write Stephen Brown and Charles Mason of Resources for the Future.
What's the case against?
Sen. Ed Markey (D) of Massachusetts argues that much of the original rationale for the ban is still in place. "This reported decision by the Commerce Department puts America on a slippery slope to send more of our oil abroad, even at a time when the Middle East is in disarray and tensions are running high with Russia," he said in a statement Wednesday. "We should keep our resources here at home for American families and businesses, not send this oil abroad even as we import oil from dangerous regions of the world."
Some environmentalists argue that lifting the ban, by boosting oil industry profits and promoting new production, will increase greenhouse-gas emissions and contribute to harmful climate change.
The consumer could be the loser, argue those wary of the policy shift. Gasoline prices would be lower if the US continues to keep most of its own crude oil at home, and sticking with the export ban would encourage new refinery capacity.
Interesting topic... at least it should be to those who experienced the Arab oil embargo by OPEC in the 70's...
(http://sphs73reunion.org/images/remember73/main/gas%20shortage.jpg)
(http://www.thetruthaboutcars.com/wp-content/uploads/2013/10/1973-oil-embargo.jpg)
Yeah this is an interesting topic. Personally I think we should keep what we have at home.
One of the arguments for export...
QuoteUS refiners are mostly adapted to process "heavy" forms of oil, while the lighter shale output might find its best home overseas.
IMHO US refiners need to expand their operations to process the shale oil. Of course a pipeline would help...
Remember when people were upset about $3+/gal gas prices? Now I guess that's just the "norm" :(
Even though we're using less gas now than 10-20 years ago the price remains high. I'm not sure if we can blame China or not but I'd sure like it to go back down to a buck.
I dont think this proposal would have much effect on price. It would simply keep more oil "in house" and lessen our imports...
With decreasing gasoline use domestically and environmentals and permitting getting harder and harder to accomplish, refiners are loath to finance, build and operate any new refineries.
Yes, once upon a time, we used to build them right next to the oil source to reduce transit times. Now we expand existing capacity and bring the oil to them.
Since no new refineries are being built and usage is declining, we have been actually closing refineries, mostly ones that are old, environmentally unsound, or financially no longer worth operating.
The prices are set on global markets, so no matter how much domestic oil we produce, the prices won't change a great deal. Plus, low sulfur and other smog abating regulations going into effect essentially keeps the prices propped up as refiners have to embrace more expensive refining methods to remove the unwanted artifacts. (as well as the mandated seasonal changes)
China has offered to build a floating refining complex off of our shores to work with any of the oil we draw out, but there is politically no interest.
Exporting a great quantity of oil will help one thing, the value of the dollar overseas and reduce trade deficits. Prior to WWII we were the largest exporter of oil.
Quote from: spuwho on June 25, 2014, 07:28:34 PM
Some energy analysts argue that gasoline prices would fall. "Lifting the ban would boost crude oil production and improve the efficiency of global refinery operations," thus bringing US gasoline prices down by 2 to 5 cents per gallon, write Stephen Brown and Charles Mason of Resources for the Future.
Ok, a 2 to 5 cent reduction isn't really a reduction. You can see a range of gas prices great than that between gas stations that sit across the street from each other.
We should expand our refineries to handle the different types of crude we now have. If the Condensate can be turned into gasoline or other fuels we should be refining it.
I remember the 70's oil embargo and my mom complaining it cost more than $5 to fill up our VW Bug.
Quote from: Buforddawg on June 26, 2014, 06:35:26 PM
Quote from: spuwho on June 25, 2014, 07:28:34 PM
Some energy analysts argue that gasoline prices would fall. "Lifting the ban would boost crude oil production and improve the efficiency of global refinery operations," thus bringing US gasoline prices down by 2 to 5 cents per gallon, write Stephen Brown and Charles Mason of Resources for the Future.
Ok, a 2 to 5 cent reduction isn't really a reduction. You can see a range of gas prices great than that between gas stations that sit across the street from each other.
We should expand our refineries to handle the different types of crude we now have. If the Condensate can be turned into gasoline or other fuels we should be refining it.
I remember the 70's oil embargo and my mom complaining it cost more than $5 to fill up our VW Bug.
I remember my dad stopping at a Shell truck stop in 1970 and the pump read 29 cents a gallon. Later during the embargo and afterward the overthrow of the Shah in Iran made the price jump to .77 a gallon. We too had a Beetle and after the first embargo sorted out we replaced it with the first VW Rabbit. Probably the last time I saw truly "cheap" gas was during the run up to the Gulf War, it finally dropped to $1.01. It has never been that close to a buck since.
Avg mileage for US cars was less than 12mpg in 1973. The Beetle was great in that it got 22mpg, the Rabbit got about 26mpg. Our 75 Ford couldn't break 15mpg until they lowered the speed limit to 55mph.
Back to oil....Bakken oil is very similar to Brent, which comes from the North Sea which is petering out. So those East coast refineries love that oil since they are already set up for it. (hence all the oil trains going east) Brent prices were actually beginning to rise because it is near the end of it production life and harder to get, but then Bakken oil stepped in and Brent started dropping due to reduced demand. This caught a lot of commodities traders in London and Amsterdam off guard. There are a lot of lawsuits about price manipulation of Brent.
So just by the fact we are extracting alot of oil, it already has caused price changes around the world.
While the price certainly was an issue during the embargo... the scary part was the lack of availability. Rationing... even/odd days... stations completely out for days
The embargo didn't cause the shortages it was found, it was the federal price controls on retail gasoline. When the price of oil skyrocketed during the embargo retail distributors weren't allowed to raise their prices beyond the mandated price window.
Once the price controls were removed during the Reagan Administration and allowed to float with the market we haven't had any shortages during any crisis event since.
China recently had gas shortages but that was caused by their restrictive currency controls. Lack of adjustment meant they were getting less oil to refine for the same amount of currency used.
Once they added more trading range to their currency, more oil flowed.
It certainly was a combination of the two... imagine OPEC cutting production today by 30%...
http://en.wikipedia.org/wiki/1973_oil_crisis
QuotePrice controls and rationing[edit]
Government price controls further exacerbated the crisis in the United States,[32] which limited the price of "old oil" (that already discovered) while allowing newly discovered oil to be sold at a higher price, resulting in a withdrawal of old oil from the market and the creation of artificial scarcity. The rule also discouraged alternative energies or more efficient fuels or technologies from being developed.[32] The rule had been intended to promote oil exploration.[35] This scarcity was dealt with by rationing of gasoline (which occurred in many countries), with motorists facing long lines at gas stations beginning in summer 1972 and increasing by summer 1973.[32]
In 1973, U.S. President Richard Nixon named William E. Simon as the first Administrator of the Federal Energy Office, a short-term organization created to coordinate the government's response to the Arab oil embargo, who was called the "Energy Czar".[36] Simon allocated states the same amount of domestic oil for 1974 that each consumed in 1972, which worked well for states whose populations were not increasing.[37] In states with increased populations, lines at gasoline stations were common.[37] The American Automobile Association reported that in the last week of February 1974, 20% of American gasoline stations had no fuel at all.[37]
In the United States, odd-even rationing was implemented; drivers of vehicles with license plates having an odd number as the last digit (or a vanity license plate) were allowed to purchase gasoline for their cars only on odd-numbered days of the month, while drivers of vehicles with even-numbered license plates were allowed to purchase fuel only on even-numbered days.[38] The rule did not apply on 31st day of those months containing 31 days, or on February 29 in leap years— the latter never came into play, since the restrictions had been abolished by 1976.
In some U.S. states, a three-color flag system was used to denote gasoline availability at service stations—a green flag denoted unrationed sale of gasoline, a yellow flag denoted restricted and rationed sales, and a red flag denoted that no gasoline was available but the service station was open for other services.[39] Additionally, coupons for gasoline rationing were ordered in 1974 and 1975 for Federal Energy Administration, but were never used for this crisis or the 1979 energy crisis.[40]
The rationing led to incidents of violence, after truck drivers nationwide chose to strike for two days in December 1973 because they objected to the supplies Simon had rationed for their industry.[37] In Pennsylvania and Ohio, non-striking truckers were shot at by striking truckers, and in Arkansas, trucks of non-strikers were attacked with bombs.[37]
America had controlled the price of natural gas since the 1950s, and with the inflation of the 1970s, the market price of natural gas was not encouraging the search for new reserves.[41] America's natural gas reserves dwindled from 237 trillion in 1974 to 203 trillion[clarification needed] in 1978, and the price controls were not changed despite President Gerald Ford's repeated requests to Congress.[41]
While the Oil Embargo caused a lot of problems globally, it actually set the USA on a path in many areas that are for our benefit.
- Mileage standards
- Accelerated pollution standards
- Increased desire for alternative energies
- Investment in new energy technologies
Hard to believe but that 75 Ford LTD we had puts out more pollution in a day than a 2014 Ford Expedition puts out in 3 weeks. And gets much better mileage to boot. That is how far we have come in 40 years.
We now have everyday cars that can put out 500bhp and still get more than 20mpg and still start on a cold day. In 1975, only race cars running methanol had that power and couldn't start in the cold.
Energy independence has been a mantra for many for a long time and its has been interesting to see how much has happened since the embargo.
I actually heard a pretty interesting/scary thing the other day. While Gas prices are very high, consumption is at all time lows. This has had a dramatic impact on the Transportation trust fund that generally pays for federal highway projects. Billions of dollars are now flowing from the general fund into highway projects. This is apparently a very real problem, since so much of our transportation infrastructure is dates and needs to be repaired/replaced.
If only we had invest in more national mass transit, rather than all highways!
Here is one article I found that touches on it.
http://online.wsj.com/articles/states-move-to-plug-shortfall-as-federal-highway-fund-dwindles-1402444594
Quote from: Demosthenes on June 27, 2014, 02:07:12 PM
I actually heard a pretty interesting/scary thing the other day. While Gas prices are very high, consumption is at all time lows. This has had a dramatic impact on the Transportation trust fund that generally pays for federal highway projects. Billions of dollars are now flowing from the general fund into highway projects. This is apparently a very real problem, since so much of our transportation infrastructure is dates and needs to be repaired/replaced.
If only we had invest in more national mass transit, rather than all highways!
Here is one article I found that touches on it.
http://online.wsj.com/articles/states-move-to-plug-shortfall-as-federal-highway-fund-dwindles-1402444594
More cars are driving, but we collect less revenue overall due to better mileage.
The issue you are raising is the same one Councilman Joost was raising when they were renewing the local gas tax.
Transit or Highways, the issue would have been the same eventually. With the growth of revenue smaller than inflation rate and our aversion to fixing in favor of building new leads to these situations.
We would be complaining about decrepit transit instead of roads.