Energy Expert Tunstall: US Should Drop Oil Export Ban

Wednesday, 06 Aug 2014 07:12 AM

By Dan Weil

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With U.S. oil and gas production soaring thanks to the shale revolution, our government should drop its ban on oil exports, says Thomas Tunstall, research director of The University of Texas at San Antonio's Institute for Economic Development.

"As the oil and gas bonanza continues, the U.S. ban on crude-oil exports looks increasingly outdated, arbitrary and economically damaging," he writes in The Wall Street Journal.

"With Europe poised to endanger its gas supply by imposing more sanctions on its major supplier Russia, the possibility of energy exports from America takes on an important security dimension too."

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Refineries in the Gulf Coast and Midwest are set up to process heavy crude from the Canadian tar sands through specially optimized facilities that are not equipped to process lighter crudes like shale oil.

"This light oil can't be exported to European facilities either," he notes. "In 1975 in the wake of the Arab oil embargo, Congress banned crude-oil exports."

The government is changing its rules just slowly to account for the explosion of U.S. output, Tunstall argues. So far the Obama administration has allowed only Pioneer Natural Resources and Enterprise Products Partners to start exporting processed condensate.

Ten companies have applied to export oil, according to industry experts, he writes.

"The misalignment between the ever-increasing supply of light U.S. oil and the underutilized heavy-crude facilities on the Gulf Coast suggests that the 40-year ban on oil exports has outlived its usefulness," Tunstall states. "Congress would be wise to repeal it."

Many analysts, expect a continued gradual erosion of the ban rather than a decisive move to eliminate it.

"They're going to try and get around the export ban in a lot of ways, case by case, without lifting it," Amrita Sen, chief oil analyst for research firm Energy Aspects, tells Bloomberg. "There are a lot of things they can do to alleviate this light crude overhang."

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