IEA: The U.S. crude export ban is probably a good way to shoot production growth in the foot

posted at 1:21 pm on January 21, 2014 by Erika Johnsen

Much like the Energy Information Administration annual report released in December that pegged the United States’ crude-oil production approaching its all-time record high in the next few years, the International Energy Agency is reporting that U.S. production has been drastically exceeding erstwhile expectations and could be very well-poised to take advantage of steadily rising global demand — provided the government make a few clutch regulatory changes in short order, via CNBC:

The United States continued its “relentless rise” in crude oil production in 2013, exceeding even the most bullish of expectations, the International Energy Agency (IEA) reported on Tuesday.

…[T]he IEA noted that U.S. crude output for 2013 outstripped its projections from a year ago by around 455 kb/d, and noted that “U.S. crude oil supply in 2013 registered the fastest absolute annual supply growth of any country in the last two decades, rising 15 percent in 2013.”

This helped blunt the impact of supply declines elsewhere, notably Libya and Iran.

…[T]he IEA raised the issue of the looming crude ‘wall,’ the point at which regulations would limit the U.S. market’s capacity to absorb production growth. For example, the U.S. ban on exports of crude oil to countries other than Canada could have an impact on growth in production.

We’ve managed to accommodate our until-recently unexpected oil-and-gas boom by rapidly expanding our refinery, pipeline, and railroad capacities, as well as exporting more oil to Canada (to which our current crude-export ban doesn’t apply), but there’s only so much more production growth our infrastructure can absorb before it eventually hits the limitations of our self-restricted market. If we don’t revise our regulations for freer trade pretty soon, we may be looking at a major glut situation:

Because the U.S. has been the world’s largest importer of oil for decades, American refineries are predominantly fitted to refine the heavy lower-quality crude imported from Mexico, Venezuela and the Middle East rather than the sweet-light domestic crude. As a result, analysts are forecasting that by July 2014, the U.S. refineries will reach their limits to process excessive crude oil.

… A continuous increase in oil production, coupled with the lack of political will to relax oil export laws, might bring a significant drop in domestic oil prices and could prove disastrous for the industry, already burdened with very narrow profit margins and fierce competition. Extracting oil from shale is an expensive business, and to be profitable, U.S. shale oil producers need the price of oil to stay above $80 to $90 a barrel.


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I’m not sure it makes sense to export oil or natural gas. It keeps prices here low which greatly benefits our economy. If the price goes lower than it costs to make shale oil profitable, it’s only a concern to shale oil producers.

aniptofar on January 21, 2014 at 1:37 PM

“Shoot production growth in the foot”… The owners of the Congress must be dancing in Riyadh.

CrazyGene on January 21, 2014 at 1:38 PM

Oil and gas production in this country are increasing DESPITE the efforts and policies of the Obama Administration.

The coming infrastructure challenges (transportation / refining) are going to be the direct effects of the efforts of the Administration to curtail the private sector boom that is taking place -regardless of the jobs that are created, regardless of the benefits we gain from increased energy independence, and regardless of our ability to use these resources to grow not only our economy, but those of our closest friends.

Athos on January 21, 2014 at 1:41 PM

CrazyGene on January 21, 2014 at 1:38 PM

Far be it for us to use our resources, and those of our Canadian ally to break not only OPEC, but the ability for Putin’s Russia to use natural gas exports as a weapon.

Athos on January 21, 2014 at 1:43 PM

A good way to shoot production growth in the foot.

So the climate Chicken Littles are going to be all for it. Speaking of climate change, Steven Goddard just did a post that highlighted Stephen Schneider, way back in 1976, up to his new scare mongering tricks, but that time talking about global cooling causing our doom. I commented:

“We have to offer up scary scenarios… each of us has to decide the right balance between being effective and being honest.” -Stephen S. Schneider, 1989

Schneider, the master of “scary scenarios,” was already at it in 1976. Maybe some of the warmists just like to scare people, especially the children, for its own sake. Regardless, without a doubt, for more than a score of years, the words or sentiment of Schneider has been serving as the guiding force behind the fear mongering Chicken Littles. Over and over again, year after year, it never ends and it never stops, the warmists just keep on like a broken record repeating the same regurgitated warnings of our imminent doom. It never comes true though. It’s all baloney. Small detail.

By the way, that’s what the hockey stick was, I mean is, a [false] “scary scenario.”

Mann was doing his duty, promoting “the cause,” being “effective” by not being honest. The statistical “technique” Mann used to create the hockey stick involved heavily weighting any data that helped create a hockey stick, and seriously downplaying anything that didn’t. If random numbers are fed into Mann’s algorithm, nearly every time the result is… a hockey stick. From Jo Nova today: Mann censored data, artificially truncated data, used the wrong type of proxy, didn’t release the data, and used an algorithm that produced hockey sticks out of red noise. The hockey stick overturned decades of accepted thinking on what the past climate was like. Normally this type of paradigm changer would be met with intense scrutiny over a long time period. No scrutiny for the hockey stick though, despite the hockey stick being riddled with issues. No time period either, within months the hockey stick was accepted “by all” without question as the new shining star of the climateers. It didn’t matter to the establishment scientists and climatologists whether the hockey stick was true or not, because it was the scary scenario that would allow their “cause” to be realized. Hallelujah! Check out The Rise and Fall of the Hockey Stick: http://hockeyschtick.blogspot.com/2014/01/the-rise-and-fall-of-hockey-stick-and.html

anotherJoe on January 21, 2014 at 1:44 PM

Can you envision just how bad the economy would be without this.

That SOB Preznit is the luckiest sombitch alive.

WryTrvllr on January 21, 2014 at 1:46 PM

I’m not sure it makes sense to export oil or natural gas. It keeps prices here low which greatly benefits our economy. If the price goes lower than it costs to make shale oil profitable, it’s only a concern to shale oil producers.

aniptofar on January 21, 2014 at 1:37 PM

China will still benefit from diminished demand for foreign oil by the US. And their manpower will stay cheaper.

WryTrvllr on January 21, 2014 at 1:55 PM

anotherJoe on January 21, 2014 at 1:44 PM

A point about the hockey stick that I should have mentioned in my comment above. It was in 1998 that Michael Mann wrote his dubious paper on the h stick, and then, within months it was completely accepted by the climate establishment.

In 2001 the hockey stick became the centerpiece of the IPCC report. And to this day it remains the main feature of the shameless scare mongering of the doomsayers, often scare mongering to children. The hockey stick falsely eliminated the Medieval Warm Period which was warmer than today, eliminated the Little Ice Age which we have been naturally recovering from, and dramatically heightened the mild 20th century warming (so, the hockey stick). All those things that the hockey stick did are false. Without the hockey stick, the fear mongers have little to monger, because it means that there is nothing unusual about the current temperature and climate, and so there is nothing wrong with the climate. If it’s not broke, don’t try to fix it.

“A massive campaign must be launched to de-develop the United States” -John Holdren, Obama’s Science Czar
“Unless we announce disasters no one will listen.” -Sir John Houghton, first ipcc chair
“We’ve got to ride the global warming issue. Even if the theory of global warming is wrong, we will be doing the right thing …” -leftist Senator Tim Wirth, 1993

anotherJoe on January 21, 2014 at 2:03 PM

I’m not sure it makes sense to export oil or natural gas. It keeps prices here low which greatly benefits our economy. If the price goes lower than it costs to make shale oil profitable, it’s only a concern to shale oil producers.

aniptofar on January 21, 2014 at 1:37 PM

You are not looking at the big picture, neither economically nor politically. We and everyone else will be wealthier by letting the oil and natural gas in the hands of the people best able to use to produce wealth. Politically, we would like to see the Muslim nations and Venezuela not have the wealth to follow their destructive policies of jihad and socialism. Making the people in these countries work rather collect oil royalties will get their minds off their evil ideologies.

thuja on January 21, 2014 at 2:04 PM

I still do not understand why do we need to export our crude oil when we produce only 40% of our domestic production… It simply makes no sense…

mnjg on January 21, 2014 at 2:27 PM

production = consumption…

mnjg on January 21, 2014 at 2:32 PM

mnjg on January 21, 2014 at 2:27 PM

There is not a perfect correlation between refinery capabilities and domestic production. In other words, some of our refinery capacity is designed to process foreign crudes. If we don’t export some of our domestic crude production, we will be forced to leave it in the ground; it cannot be economically refined here.

tngmv on January 21, 2014 at 3:36 PM

If we don’t revise our regulations for freer trade pretty soon, we may be looking at a major glut situation

There is no free market for crude oil. The crude oil market is controlled by OPEC and the US can’t change that.

You can’t make the free market argument with crude.

lexhamfox on January 21, 2014 at 3:40 PM

well, china and others are going to collapse the US dollar anyway, so why not add more price manipulation to it…

Keith_Indy on January 21, 2014 at 4:13 PM

The problem is NOT that there is enough refinery capacity to take all of the crude oil produced. The problem is logistics, types of crude oil and types of refineries.

Eagleford crude is going to the East Coast because the major refineries in TX and LA are configured for heavier crude oil, such as Canadian. We ship the least condensate from Corpus Christi (aboard ship) to LOOP off of Grand Isle, LA to send it up Capline to Canada as diluent to enable very heavy crude pumped out of the ground in the “tar sands” area to be pipelined down to the U.S. Midwest and Gulf Coast.

Then there is California stuck on by itself, but that increased capacity of Canadian crude to the Pacific Coast could easily be transported via tanker to those refineries.

It’s ALL about logistics, types of crude oil and configurations of refineries.

Kermit on January 21, 2014 at 4:23 PM

It’s ALL about logistics, types of crude oil and configurations of refineries.

Kermit on January 21, 2014 at 4:23 PM

To be fair, Erika’s quote from oilprice.com did allude to the refinery logistics issue, albeit not to the same level of detail as your post (and btw, please keep posting, it’s obvious that you are immersed in the industry and have a wealth of knowledge to share in this regard).

You can’t make the free market argument with crude.

lexhamfox on January 21, 2014 at 3:40 PM

And you can’t make a commodities export argument with a view that is essentially stuck on stupid.

Far be it for us to use our resources, and those of our Canadian ally to break not only OPEC, but the ability for Putin’s Russia to use natural gas exports as a weapon.

Athos on January 21, 2014 at 1:43 PM

Do you really think, for one Cuomo minute, that this Administration would dare take on a geopolitical rival while improving energy supply and pricing for its allies? Your punishment for this snark is to spend a day with Joe Biden and John Kerry. Off with you, sir!

I’m not sure it makes sense to export oil or natural gas. It keeps prices here low which greatly benefits our economy. If the price goes lower than it costs to make shale oil profitable, it’s only a concern to shale oil producers.

aniptofar on January 21, 2014 at 1:37 PM

Hmmm. If the article Erika quoted at oilprice.com is correct (“Extracting oil from shale is an expensive business, and to be profitable, U.S. shale oil producers need the price of oil to stay above $80 to $90 a barrel“), your comment of “[i]f the price goes lower than it costs to make shale oil profitable, it’s only a concern to shale oil producers” tells me that either you want the shale producers to fail, or else you are just as stuck on stupid as the person who believes that OPEC owns the entire international oil commodities market.

After all, if the shale oil producers dip into the red due to high extraction costs and stop producing, what do you think happens with the domestic oil and gas supply (and resulting prices) then?

But as they say at Ace’s blog, keep f**king that chicken…

Wanderlust on January 21, 2014 at 8:10 PM

…and who is caring?

KOOLAID2 on January 21, 2014 at 9:13 PM