At the end of last week President Obama signed a new bill into effect, lifting a ban on U.S. crude oil exports that had been in effect since the oil shortages of the 1970s. With crude oil reserves exceeding 490 million barrels, what effects will this lift on the exporting ban have on the oil industry?
The U.S. Energy Information Administration (EIA) conducted a study which determined that domestic gasoline prices could be slightly reduced by this move (though they may also remain unchanged). The study also examined how the change will affect the industry on a global level.
“Although unrestricted exports of U.S. crude oil would leave global crude prices either unchanged or falling slightly compared to parallel cases that maintain current restrictions on crude oil exports, other factors affecting global supply and demand will largely determine whether global crude prices remain close to their current level, as in EIA's Low Oil Price case, or rise along a path closer to the Reference case trajectory,” said the EIA, referencing charts offered in its study. “Global price drivers, as well as resource and technology outcomes, will affect growth in U.S. crude oil production regardless of decisions about future U.S. crude oil export policies.”
That fall in price has already come to pass—today Brent crude oil prices were listed at $36 per barrel, an 11-year low, leading some to worry that the U.S.’s massive oil reserves could flood the market and cause problems for the budgets of other oil-exporting countries. Whether this price dip is just a temporary reaction or indicative of a longer-lasting shift remains to be seen.
Meanwhile, U.S. industry insiders are already starting to offer comments on the lifting of the ban and their take on how it will change the domestic oil production industry and relations abroad.
"This is a historic day, and one that is long overdue," Dan K. Eberhart, CEO of Canary, LLC (among the largest private oil field service companies in the country) responded in a press statement. "I applaud our lawmakers for their dedication in staying the political course and finally lifting this ban. I'm eager to see the benefits unfold from this policy change."
In addition to addressing the country’s changing energy production landscape, Eberhart also spoke to the political implications of this change.
"This represents a gesture of international goodwill by our country and demonstrates our clear commitment to free and fair trade [and] puts us in a strong position to counter foreign nations' aggression toward our allies because we are now able to present ourselves as an alternate and reliable supplier of crude,” he added. “We now have the ability, at our discretion, to curtail, increase, or even put a temporary hold on our country's crude exports. This means that if we, our allies or any neutral nation are in trouble, we have a domestic energy surplus to depend on and leverage in our favor or on behalf of other nations. In terms of our security at home and that of our friends overseas, that's a game changer."