How much oil can America export?

The lag in pipeline infrastructure is part of a big chicken-and-egg problem. Most of the rail transportation comes from the Bakken shale formation in North Dakota where some 70 percent of production is shipped by rail, mostly to the East and West Coasts. Refiners on the U.S. Gulf Coast do not need light sweet crude and indeed have a superabundance of it locally in the Eagle Ford and Permian Basin in Texas. But refiners on the two coasts are fearful that, if they commit to use pipelines to transport the crude oil they need, they could end up in an unfavorable position economically if the United States were to ease restrictions of exports. Similarly, companies and investors are unwilling to commit to build new refinery capacity lest Washington lift the export restrictions, impacting their feedstock costs.

Export capacity is constrained both because of congestion in the U.S. Gulf of Mexico harbors and because of lack of investment, which itself is being held back because of uncertainty related to export restrictions. So even if U.S. export restrictions were to be relaxed significantly it could take years to get the infrastructure in place.

In the end, there remains an inevitable day of reckoning when U.S. crude production cannot escape its North American confines, pushing down domestic crude oil prices and endangering production, without widely liberalized exports. That day may be coming sooner than people expect, perhaps before the end of 2015. Meanwhile outcomes for production and export levels make a big difference — to the trade balance and to energy-intensive industries like fertilizers, petrochemicals, and processed metals.