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Why the World Should Brace for a Future U.S. Oil Embargo

By Daniel J. Graeber | Sun, 09 February 2014 00:00 | 5

U.S. policymakers are divided over what to do with the glut of domestic oil. Both sides of the debate craft their rhetoric around economic issues, though a report from a Washington think tank with close ties to the Obama administration said that misses the broader point.

"The United States should accept the reality of energy interdependence, take steps to decrease domestic consumption and diversify supplies, facilitate broader energy exports, and more deeply and creatively integrate energy security into strategic policy and military planning," a report from the Center for a New American Security said.

The U.S. Energy Information Administration said crude oil production for the week ending Jan. 31 was 8.04 million barrels per day, a 15 percent increase from the same time last year. That's lead many political leaders to say now is the time to reverse the ban on crude oil exports enacted in the wake of the Arab oil embargo in the 1970s.

Sen. Lisa Murkowski, R-Alaska, ranking member of the Senate Energy and Natural Resources Committee, said reversing the ban is "critical" for American consumers.

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"The International Energy Agency has warned that maintaining the ban may actually result in shut-in production, which would be to the detriment of the nation’s livelihood," Murkowski said. "Lifting the ban is about increasing domestic production and creating jobs."

The 35-page report from CNAS, written by senior fellow Elizabeth Rosenberg, said the economic connection that would come from exports could manifest itself as "coercive political influence" on the international stage. According to the Office of the Historian at the U.S. State Department, the oil embargo from Arab members of OPEC had global implications that lasted well beyond the 1970s. With crude oil exports, that same leverage would be in the hands of Washington.

Sen. Ron Wyden, D-Ore., chairman of the Senate energy committee, said he hasn't taken a position on crude oil exports, but wanted to make sure U.S. consumers won't wind up feeling more pain at the pump "because of some theory that everything is just going to turn out hunky dory in the end."

Related article: Getting Around the US Crude Export Ban

Rosenberg's report said oil prices in particular have been held down because of the increase in production from U.S. shale deposits. The Commerce Department said last year's average price of $97.01 for a barrel of crude oil imported into the United States was less than 2012's average. Nevertheless, oil is traded in a global market that's "deeply interconnected," meaning U.S. consumer energy products like gasoline won't be shielded entirely from international issues, the CNAS report said.

The Commerce Department said the United States imported 2.81 billion barrels of oil last year, down 9.2 percent from 2012. But that's not necessarily an indication of economic protection. CNAS said much of the debate over what to do now ignores the geopolitical aspects of energy however, suggesting the crude oil export debate is more than a dollars-and-cents issue in and of itself.

By. Daniel J. Graeber of Oilprice.com

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  • zipsprite on February 10 2014 said:
    We're still importing close to 8m/b a day of oil and we have a "glut of domestic oil"? I personally have no opinion on the export issue- I'm sure there are strategic and logistical reasons why it would make sense to export some oil- but the idea that we are producing all the oil we are using....well, I want some of what them dudes are smoking.
  • diemos on February 10 2014 said:
    There's a little thing called reality.

    You might want to look into it. It could really help your analyses.

    eia says were still importing 8.8 million BPD of crude oil.
  • Pervez Beg on February 10 2014 said:
    I agree,i wonder why do we make things difficult let the market adjust it self
  • MIttyc on February 11 2014 said:
    I agree with the previous two comments. Can somebody explain why the terminality of oil reserves is not mentioned in all these debates? According to the June 2013 EIA assessment, November US has about 58 billion " technically recoverable" shale oil reserves, out of a world total of 345 billion with Russia having the most at 75 billion. This, coupled with the US conventional oil reserves of 35 billion, gives the US a total of 93 billion only, out of a world total of 2020 billion barrels. At the 2012 US consumption rate of 18.6 million barrels a day, this 93 BB will last just 14 years even if we can extract at more than double today's rate of 8 million barrels a day . So why on earth are we talking of exporting, except perhaps that oil companies and oil-rich states can profit immediately, ignoring the long time welfare of the country as a whole? Sheer opportunism and immediate greed I would say. The math is not complicated. 3 rd graders would comprehend it.
  • Spencer on March 31 2014 said:
    To understand why America would benefit from lifting the export ban one needs to understand the differences in crude. I started to type it up then I realized how complicated it is so I stopped. Just know that American refiners have invested alot of money in order to run "nasty" (high sulfur, high acid) crudes, like Merey from Venezuela. Fracked crudes are sweet and low sulfur. America is getting close to having a sweet crude glut. It wouldn't make economic sense to run sweet crude through a sour crude refinery where you've invested money in order to run the high acid, high sulfur stuff. That's why we want to export, It makes no sense to run Eagleford through my sour crude unit where we've spent lots of money to alloy up, better to sell the Eagleford to Europe and buy the Merey from Venezuela, does that make sense?
    I'm a corrosion engineer at an oil refinery.

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