Shale Oil Production Leads To Fractured Debate On Crude Oil Export Ban

by King & Spalding
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The debate regarding the U.S. ban on crude oil exports, which has been in effect for nearly forty years, is escalating. Due to the 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 export ban in recent months. Other members of these same groups have disagreed, arguing that the country is better off keeping U.S. crude oil inside its own borders. While the future of the export ban is unclear, the consequences of this debate are important for U.S. manufacturing and the U.S. economy.

The crude oil export ban has existed since 1975 and was enacted shortly following the oil shortages caused by the oil embargo of Middle Eastern oil-producing countries against the United States. 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. As reported previously, in October 2013, the U.S. industry produced more crude oil than the country imported for the first time in nearly twenty years. The upward trend in oil production has caused Secretary of Energy Ernest Moniz to say that the export ban may need to be reexamined in the context of today's energy situation.

Proponents of repealing the ban argue that permitting crude oil exports will lead to increased production and, consequently, new jobs, economic growth, lower gas prices, and energy independence. Among the more prominent advocates for repealing the ban are Senator Lisa Murkowski (R-AK), who released a white paper on U.S. energy exports and delivered a speech on the topic at the Brookings Institution in January 2014, and multiple large oil companies such as Exxon Mobil and ConocoPhillips.

Consensus, however, does not exist in the Senate or the oil industry. Senators Robert Menendez (D-NJ) and Edward Markey (D-MA) have been outspoken in their support of maintaining the ban. Senator Menendez argues that lifting the ban would raise domestic oil prices and hurt U.S. consumers. Senator Markey says that the export ban is "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, Valero Energy, a U.S. oil refiner, voiced its support for the export ban in January 2013 by saying that it "has significantly reduced American dependence on foreign oil, kept U.S. refining utilization high, and insulated American consumers from geopolitical shocks."

Increasing shale oil production has resulted in an important energy and international trade policy debate. With shale oil production increasing, the economic and policy issues are likely to intensify, and the issue will have a significant impact on U.S. manufacturers and consumers.

-Clint Long

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