Posted 12/29/15 (Tue)
By Neal A. Shipman
With the removal of the ban of exporting U.S. crude oil, the United States Congress has finally put the American oil industry back on equal footing with the rest of the world’s oil producers. And all I can say is it was about time that Congress and President Obama lifted this antiquated ban that has put the U.S. oil industry at a competitive disadvantage.
The U.S. oil exporting ban was put in place in the 1970s in response to the Arab embargo that kept Middle East oil from being sold to America. America’s decision, at that time, made sense. But it didn’t make sense for America to retain its ban once OPEC lifted its ban.
So for 40 years, American oil companies, which compete in a global oil market, were forced to sit on the sideline and not be able to sell their excess oil.
And that ban on exporting U.S. oil created much of the problems that this country is experiencing as America’s oil production began increasing as a result of the shale oil play in North Dakota and Texas.
While the ban was in place, U.S. oil storage facilities were filled to capacity. And to make matters worse, this country’s oil refineries weren’t designed to efficiently process the new lighter sweet crude that was being pumped out of the ground.
Because of the export ban, America was awash in crude oil and with no place for the oil to go, prices for American crude oil were substantially below the price of Brent crude. Likewise, North Dakota’s Bakken oil was being sold at an even lower price.
At a time when non-oil producing countries were gobbling up oil from OPEC, Russia and other foreign producers, American oil companies weren’t able to sell them a single barrel of oil.
Will the lifting of this decades old ban on the sale of U.S. oil overseas have an immediate impact on American production or the price of U.S. oil? The answer to that question will be played out over the next several months and years.
But the benefits of eliminating the ban are pretty obvious.
First, being able to export American oil overseas will increase jobs associated with building and supporting the infrastructure needed to export oil.
Second, it should enhance the continued exploration, drilling and production of oil in North Dakota and across the United States.
Third, it will help the United States improve its trade balance as American oil companies begin selling their oil overseas.
And finally, even though the world is seeing record low oil prices, the end of the ban gives the U.S. petroleum industry a better long-term outlook as they are now able to compete on equal footing with OPEC and other foreign oil-producing countries.