Changing US Energy Policy?
Despite the restrictions on exporting crude from the US, exports have grown. In 2014, crude exports totaled 346 kbpd, up from 50 kbpd in 2000. But the true growth has been in US exports of other products, as shown in Figure 6. Exports of natural gas liquids and liquefied refinery gases grew from 78 kbpd in 2000 to 707 kbpd in 2014. And the US has become the largest exporter of refined product in the world. Refined product exports have increased from 863 kbpd in 2000 to 2766 kbpd in 2014.
Figure 7 compares the growth in refined product exports with the trend in refined product imports, defined here as finished products, not feedstocks and blendstocks. Some in-and-out trades are essential for balancing supply and demand in various submarkets and in various seasons, but the increase in refinery throughput has displaced a substantial volume of foreign product as well. Exports of refined products have risen by 1903 kbpd since 2000, while imports of refined products have fallen by 928 kbpd. The astonishing growth in exports makes the case that the shale boom has necessitated exports, and if exports of crude are restricted, the crude will be converted into a form that can be exported. Trying to treat the US as a closed system with regard to petroleum supply and demand simply is impractical. If crude oil builds up into a surplus in one area of the country, a way will be found to deal with that oversupply. Realistically, the restrictions on exporting crude petroleum simply add a level of complexity.
Would rescinding these restrictions be good for the economy? Most economists believe so, simply because eliminating barriers to free trade allows markets to work, and this encourages efficiency. Naturally, there are those who oppose changing the law. Perhaps they believe that energy security is enhanced by the law, or perhaps their segment of business would be hurt by the change. When laws like the Energy Policy and Conservation Act and the Export Administration Act have been around for decades, the market adjusts and grows around the policies. Figure 7 can be used as an analogy for US energy policy. By now, the tree has grown around the motorcycle, and we all wonder, can the motorcycle be removed without harming the tree?
US Policy Concerning Oil Exports
- Mineral Leasing Act Of 1920: The Mineral Leasing Act of 1920 is administered by the Bureau of Land Management (BLM) within the Department of the Interior. The act governs the leasing of public lands for mineral prospecting and production. It also established the first petroleum reserve by setting aside certain lands in California and Wyoming for the use of the US Navy.
- Energy Policy and Conservation Act of 1975 (EPCA): The EPCA was a Congressional response to the Arab Oil Embargo of 1973, which caused the first major oil price shock in the United States. EPCA’s goal was to encourage domestic energy production on the supply side and to encourage conservation and efficiency on the demand side. It also gave the Executive Branch powers to deal with energy supply disruptions. EPCA established three key elements of US energy policy: the Strategic Petroleum Reserve, the Energy Conservation Program for Consumer Products, and Corporate Average Fuel Economy (CAFE) standards.
- Export Administration Act of 1979: The Export Administration Act of 1979 gave the President powers to restrict US exports for reasons of national security, foreign policy, or short supply. The Export Administration Regulations set forth the “Short Supply Controls” that restrict crude oil exports. The license requirements define a number of permissible types of exports, such as exports to Canada for consumption therein. Other exports must be found to be in the national interest.
1 The data used for the charts in this article are based on data published by the US Energy Information Administration. Year 2014 averages are derived from monthly data.
2 http://www.bis.doc.gov/index.php/regulations/export-administration-regulations-ear
