Crude Clash

Rethinking the Ban on Exporting U.S. Oil

Best Bloomberg Photos For 2011

Exporting crude oil from the U.S. has long been largely illegal. Until lately, it has also been mostly unthinkable. Domestic production had been declining for decades and the country seemed hopelessly addicted to foreign supplies. Not anymore. Horizontal drilling and hydraulic fracturing have squeezed torrents of oil from shale rock deep underground. The U.S. produced more oil in 2013 than it imported for the first time in two decades and in 2015 it surpassed Russia and Saudi Arabia to become the world’s biggest producer. Can exports be far behind?

The Situation

The U.S. bans most exports of crude oil, the stuff that comes from the ground before being turned into gasoline, heating fuel and other useful products. That’s been true since 1975, after an Arab oil embargo shocked the economy. Now production, which averaged 7.4 million barrels a day in 2013, will average 9 million barrels a day by the end of 2015. That’s pushing down domestic prices more than foreign ones: West Texas Intermediate crude will average $49.53 a barrel in 2015, while Brent, the international benchmark, will average $53.96, the U.S. Energy Department estimates. While refineries benefit from cheaper costs compared with foreign competitors, producers want access to higher prices from overseas buyers. In June 2014, the U.S. began to open that door a crack when the Commerce Department allowed Pioneer Natural Resources to export a type of minimally processed ultra-light oil known as condensate. In December 2014, the government let companies know they could ship lightly refined condensate without special permission. In August 2015, it decided to permit an exchange of some crude oil with Mexico. In October, the House of Representatives voted to end the ban, but by too small a margin to overturn a threatened presidential veto. Two Senate committees have approved legislation to lift the 40-year-old crude-export ban, though the full chamber hasn’t taken up the issue.

Source: U.S. Energy Information Administration
Source: U.S. Energy Information Administration

The Background

It may seem counterintuitive to talk about exporting crude oil when the U.S. still imports more than 7 million barrels a day, more than any other country. But crude oil isn’t perfectly fungible. Oil from different regions comes in different grades, meaning variations in density and sulfur content. The cost of moving crude by pipeline, rail or ship can also create bottlenecks. Most of the growth in U.S. production is light shale oil, but many refineries are configured to process heavier crudes from South America and the Middle East.

The Argument

Producers that want to sell oil at higher prices overseas argue that keeping the export ban will push down domestic prices until drilling becomes unprofitable, jeopardizing the U.S. goal of energy independence. Some independent refiners support the ban to maintain their cost advantage, which helps them sell record amounts of fuels abroad (because exports of oil products are permitted). European and Asian refiners, by contrast, may benefit from access to U.S. crude. Some politicians, such as Democratic Senators Edward Markey of Massachusetts and Robert Menendez of New Jersey, contend that allowing crude exports may lead to higher gasoline prices. (Similarly, government approval for facilities to ship liquefied natural gas was opposed by chemical companies that use the fuel as a raw material, arguing that exports would raise prices at home.) While Republicans, including several presidential contenders, tend to favor lifting the ban, many Democrats, including President Barack Obama, oppose it as a step back on limiting carbon emissions. Democratic presidential candidate Hillary Clinton says she’s against the move unless it’s paired with measures to support renewable power. As the debate heats up, the industry is finding ways to work around the oil-export ban. U.S. exports reached a record 586,000 barrels a day in April; most of it went to Canada, which is allowed with a license. Companies are also expanding shale processing equipment, such as Kinder Morgan’s simplified refineries called splitters that process condensate just enough to qualify as a product that can be legally exported.

The Reference Shelf

  • Senator Lisa Murkowski, a ban opponent who heads the energy committee, issued a report on the U.S. energy outlook through the end of the decade.
  • Testifying before a House committee in July, Terrence Duffy, chairman of CME Group, which runs the New York Mercantile Exchange, said that without the ban, the world could use the U.S.’s West Texas Intermediate benchmark oil price instead of European Brent.
  • Congressional Research Service report on crude oil export licenses.
  • Energy Department data on production and trade.

To receive a free monthly QuickTake newsletter, sign up at

First Published Feb. 27, 2014

To contact the writer of this QuickTake:

Brian Wingfield in Washington at

To contact the editors responsible for this QuickTake:

Jonathan I. Landman at

Anne Cronin at