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By late 2014, every barrel of locally produced petroleum product and crude
oil as well as the yet-to-be-legally-defined category of condensate
(chemically, a form of ultra-light crude oil) that can get out of the country
is, in fact, getting out. Too much attention has been placed on whether to
lift the ban on crude oil exports. Only a limited ban effectively impacts oil
produced in federal waters or transported through a federally mandated
pipeline; elsewhere, there is a minefield of obstacles to exporting crude oil
from the United States but a fairly permissive regulatory framework that
already applies to Canada, is likely to be applied within a year to Mexico
(and soon thereafter to some free trade agreement partners), even without
legislation to lift the bans.
Allowable exports of crude oil and condensates will exceed 1 mb/d gross by
early 2015, if not before. Exports to Eastern Canada are marching toward a
half a million barrels a day, and we can expect a return to exports out of
Alaska, which could grow to a higher, steadier state of above 100,000 b/d.
We can expect exports to Mexico to begin to materialize at least under an
exchange program and to grow possibly to well over 200,000 b/d, and for
allowable exports of processed condensate to reach 200,000 b/d or more
before long, and for re-exports of Canadian crude oil entering the United
States by both pipeline and rail to reach a similar level. Already the U.S.
exports around 400,000 b/d, which is more crude oil than OPEC member
Ecuador, although the U.S. still imports around 7 mb/d, and thus remains a
The United States has reduced its net oil imports (that is, net imports of
crude oil and petroleum products combined) by a stunning 8.7 mb/d over a
very short period of time thats more than the total production of any
country in the world other than the United States, Russia, and Saudi
Arabia. Just eight years ago, in August 2006, the United States imported,
net, a little over 13.4 mb/d of crude and products; by the middle of 2014,
that had fallen to 4.7 mb/d.
We can expect that the oil import gap will be totally closed well before the
end of the decade, possibly by 2019 if not by 2018, at which time the
United States should become a net exporter of crude oil and petroleum
products combined. But that doesnt mean that obstacles have been
overcome.
Since the start of the ramp-up of Canadian and then later U.S. production
there has been a lag in infrastructure to get new production to domestic
markets and product and crude oil to foreign markets. An enormous buildout of rail transportation for crude has resulted, bringing oil to pipelines,
refineries, and ports both within the United States and from Canada to the
United States. Combined volumes have grown dramatically since 2010,
rising from less than 50,000 b/d to nearly 1 mb/d at the end of 2013.
Despite the fact that pipeline transportation is far more efficient than
In the end, there remains an inevitable day of reckoning when U.S. crude
production cannot escape its North American confines, pushing down
domestic crude oil prices and endangering production, without widely
liberalized exports. That day may be coming sooner than people expect,
perhaps before the end of 2015. Meanwhile outcomes for production and
export levels make a big difference to the trade balance and to energyintensive industries like fertilizers, petrochemicals, and processed metals.