By George Baker
The ongoing shale oil renaissance and the United States’ abundant natural resources has transformed our energy landscape, allowing American consumers access to affordable fuel supplies and spurring significant investment and job growth across our economy.
But in order for this renaissance to continue, it is critical that lawmakers ensure that U.S. policy keeps pace so that our energy resources are being leveraged to provide the maximum benefit to the nation’s economy and international geopolitical interests.
This point was made clear at a recent House Energy and Commerce subcommittee hearing, where witnesses emphasized the enormous value that the changing dynamics in the global energy markets offered for the U.S. economy and America’s energy security.
The hearing highlighted the fact that all this historic promise is jeopardized by a little known provision of law that was enacted 40 years ago in the wake of the Arab oil embargo, which restricts the export of domestically produced crude oil. And whatever the merits of this policy may have been then, in this new age of energy abundance, prohibiting the export of America’s excess supply of crude oil no longer makes any practical or political sense.
As the global leader in oil and natural gas production – recently surpassing both Russia and Saudi Arabia – the U.S. has turned global energy markets upside down. According to the U.S. Energy Information Administration, we now produce 9.2 million barrels of crude oil each day – the highest annual average in over three decades. Much of this growth is attributed to shale development and the production of light crude oil.
However, because much of our domestic crude oil refining capacity is configured to refine heavy grades of crude oil which are largely imported, we now find ourselves in a position where there’s a growing “mismatch” between the oil we produce (light) and the type of oil we can refine (heavy).
Domestically produced light oil has already reduced the volume of imported light oil by three million barrels per day. However, given the lack of refining capacity to handle the increased production, crude oil inventories are swelling to record levels, creating a glut of light oil that is depressing domestic crude oil prices. This is causing the spread between international (Brent) and domestic (WTI) crude oil prices to widen.
Baker is executive director of the Producers for American Crude Oil Exports, a coalition of independent oil producers.
Read the full op-ed at The Hill HERE.