If you caught API’s first-ever Super Bowl commercial this month, you got a brief glimpse of the massive changes occurring right now in U.S. oil and gas. “This ain’t your daddy’s oil” is right. Partly because your daddy’s oil was still under the export ban.
As of last week, just a little over one year since Congress lifted the 40-year crude oil export ban, the U.S. is exporting a record 1 million barrels of oil per day to the global market.
While the U.S. has continued to break its own export records since Congress lifted the crude oil export ban in December 2015, OPEC’s 2017 production cut deal has created even more demand for U.S. crude. Increased U.S. export comes with some serious benefits.
American energy independence may be closer than we expect – as long as our nation’s policy makers continue to support enhanced production, infrastructure, investment, research and development.
Fracking Prompts Congress to Lift 40-Year U.S. Crude Oil Export Ban
The U.S. started exporting oil as early as 1913, with Japan as a major buyer until its invasion of French Indochina in 1940. But, by the end of World War II, America’s economic growth and its love of automobiles required more oil than it could extract domestically. The U.S. began importing oil from Saudi Arabia, and by the 1950’s, had undergone a complete shift from a net crude oil export nation to a net import nation.
Two decades later, in response to the 1973 Arab Oil Embargo, the U.S. banned virtually all American oil exports.
Enter the Shale Revolution. Hydraulic fracturing and horizontal drilling technologies combined brought U.S. oil production to record highs at a breakneck pace, and by mid-December 2015, Congressional leaders agreed to lift the nation's 40-year old ban on oil exports.
Just two weeks later, NuStar Energy and ConocoPhillips announced the first exports of domestic crude shipping out from the Texas Eagle Ford Shale to Europe. Today, U.S. shale oil producers continue to break U.S. crude export records, shipping out to nations worldwide.
U.S. Crude Exports Averaged 685,000 BPD Over Past Four Weeks
U.S. oil producers shipped a record 7 million barrels out to the global market last week at 1 million barrels per day (double the week prior), around the same amount of production cut by OPEC. Exports averaged 685,000 bpd over the last month and are now at around 500,000 barrels a day.
With OPEC and non-OPEC members agreeing to cut production for 2017, the International Energy Agency predicts an increase in demand of 1.4 million barrels for 2017. U.S. shale oil is meeting much of this demand, exporting crude cargoes to Canada, Europe and Latin America.
With China’s purchase of a number of U.S. shale outfits, Asia is a major buyer of U.S. exports. In December 2016, Unipec and PetroChina chartered 2 million barrels to China.
EIA Predicts Net U.S. Petroleum Export by 2021
Even with the record exports, the U.S. continues to be a net importer of oil, bringing in 7.5 million barrels of oil last week from Canada, Saudi Arabia, Venezuela and Columbia. The U.S. imported 7.88 million barrels of oil per day in 2016 – largely due to refinery requirements. But with increased support for developments in infrastructure like pipelines, refinery facilities and export terminals, under higher oil price and higher resource scenarios, the EIA predicts the U.S. will become a net petroleum exporter by 2021.
The EIA 2016 Annual Outlook estimates that, even under the base case, net U.S. energy imports could reach zero by 2028. According to the EIA, continued increases in oil and natural gas production, growth in renewables and the application of demand-side efficiencies could eliminate net U.S. energy imports within the next one to two decades.
Export Means More Jobs, Increased GDP, Trade Deficit Reduction and Enhanced Security
Columbia University estimates that U.S. crude oil exports could lead to domestic production of up to an average 12 million barrels per day by 2025. IHS Energy estimates that total U.S. jobs will increase by an average of 394,000 due to free trade, with peak job creation in 2018 at nearly 1 million. Investments in domestic oil production with the expansion of crude exports could result in $15.2 to $70.2 billion in additional investment in U.S. exploration, development and production in crude oil by 2020.
Allowing the U.S. to sell crude oil to trading partners generates significant benefits for American consumers and the economy. ICF International estimates higher U.S. oil production resulting from export will increase U.S. GDP by $38.1 billion in 2020. U.S. federal, state and local tax receipts attached to GDP increases resulting from expanding crude oil exports could reach $13.5 billion in 2020.
Analysts expect government revenues from corporate, personal and energy-related taxes and royalties to increase as well, with a cumulative addition to revenue of $1.3 trillion from between 2016 and 2030.
Today, oil imports account for about 30% of America’s $448.8 billion annual trade deficit. Enhanced export should contribute to further declines in net crude oil imports, thereby reducing the U.S. trade deficit. ICF International predicts that expanded U.S. exports could narrow the U.S. trade deficit by $22.3 billion in 2020.
The nation is now on track to wipe out the entire trade deficit within the decade, returning to a trade balance, even a surplus, that has not been seen in years.
Fracking has increased U.S. oil output by two-thirds in a mere four years. The ability to export these abundant resources has made a good thing even better, boosting potential for economic growth, employment and global competitiveness and creating an opportunity to bring down our long-lived trade deficit. With crude oil export, America is now able to aid its allies and exert enhanced non-military influence on foreign policy.
Decreased reliance on foreign supplies of oil and natural gas enhances both national and global security and brings stability to the energy market, further magnifying economic growth.
The Shale Revolution has set the stage for energy independence. All we require is the continued support of our nation’s policymakers to promote advancement toward domestic resource production, infrastructure, investment, research and development.