One of the energy themes we need to keep track of in 2014 is the possible end of the crude oil export ban here in the US, in place since the 70’s. Energy Secretary Ernest Moniz called the ban ‘outdated’ at the Platts energy conference here in New York last Thursday.
Because of the quick rise of domestic oil production from shale, the US has experienced a deep surplus of high-quality low sulfur crude oils being produced in the mid-continent from the Eagle Ford, Bakken and Permian shale plays. But because of the export ban on domestic crude, that oil has been forced into storage in financial nexus points like Cushing, Oklahoma and refinery nexus points like the Gulf Coast. That, in turn, has caused a discounted price for our own produced crude oil compared to global prices, ranging in the last two years from $6 to $25 a barrel.
Oil companies have been lobbying the Commerce Department to relax the hurdles to gaining export licenses, currently only rarely given and almost exclusively for export into Canada (where there is plenty of cheap crude anyway). The statement by the Energy Secretary would seem to indicate that the White House is ready to discuss an end to the export ban.
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