Oil Export Ban May Hurt Economy

Oil Export Bans
Oil Export Bans

U.S. crude production reached record levels in 2014 and the growing surplus has many questioning why a 40 year-old oil export ban is still on the books.

The export ban on all petroleum products was imposed during the 1970s as a way for the government to control prices during a time of scarcity. But times have changed and since 2008, U.S. crude oil output has increase by 81%. This record production is beginning to overtake the industry's ability to economically process these growing volumes and producers and analysts are raising their voices to advocate for a repeal on the anachronistic law.

Related:Continental Resources CEO Pushing for Lift of Export Ban

Reporting to the Senate Committee on Energy and Natural Resources, IHS Vice President, Ambassador Carlos Pascual testified “The conditions that justified the crude oil export ban in 1973 no longer apply. More importantly, continuation of this ban hurts American consumers, causes an unnecessary drag on American productivity, and does not let the United States exploit fully the national security benefits from our energy resurgence.

Earlier this month, IHS issued a report on the implications of the current ban and concluded that lifting the export ban could create hundreds of thousands of additional U.S. jobs and add billions to the U.S. economy.

Related: Oil Export Ban Is Hurting Your Royalty Checks!

The report goes on to say that eliminating the ban will have far-reaching consequences for the U.S. economy including:

  • Further increases in domestic oil production
  • Lower gasoline prices
  • 964,000 additional jobs
  • Benefits to manufacturing and service-related sectors in every state
  • Strengthening national security and America’s position in the world

Read more at ihs.comPhoto: © Hramovnick

IHS: U.S. Shale Production Growth Will Slow, but Still Remain High

ND Pump Jack Photo
ND Pump Jack Photo

The dip in oil prices isn't making a huge impact yet on the vast majority of U.S. shale production.

According to a report by research consultancy IHS Energy, most shale plays are economic and ~80% of potential drilling in 2015 would remain strong at WTI crude oil prices as low as $70 per barrel.

Since 2008 the cumulative growth in U.S. tight oil production has been 3.5 million b/d—far exceeding supply gains from the rest of the world combined—making tight oil the key driver of global supply growth,” said Jim Burkhard, Vice President, IHS. “While current lower crude oil prices do present challenges for new investment, IHS analysis shows that the vast majority of potential U.S. supply growth in 2015 remain economical at $70 for WTI.” Jim Burkhard, VP IHS

WTI traded at ~$76 on Monday, a nearly 20% drop since September. As a result, Bakken operators, including Emerald Oil, Inc., have already announced plans to potentially scale back their drilling programs in 2015.

Read more: Emerald Oil May Scale Back Bakken Drilling Program in Q1 2015

North Dakota’s Department of Mineral Resources (DMR) Director Lynn Helms updated lawmakers in October on the status of oil & gas development in the state. Helms said two factors could negatively impact oil production – lower oil prices and new flaring regulations.

Read moreBakken Drillers Could Be Forced to Scale Back 2015 Efforts

Growth Still High, But Expected to Slow in U.S. Shale Plays

At lower prices, growth will slow, but still remain high, according to the report. In 2015, IHS estimates U.S. shale production will grow by 700,000 b/d at an average price of $77 per barrel in 2015. By contrast, in 2014, growth from U.S. shale plays was more than 1-million b/d.

Expectations of the future—and the trajectory of oil prices—means that prices do not need to fall to the breakeven price before psychology, investment, and thus output, is affected,” Burkhard said.

Approximately 80% of anticipated production has a break-even price between $50 to $69 per barrel, according to the report.