martes, 1 de septiembre de 2015

Shell on Alaska: 26 billion barrels of recoverable oil. (Elliot Hannon)

The U.S. government gave Royal Dutch Shell the final go-ahead on Monday to drill for oil in the Arctic Ocean off the northwest coast of Alaska. The Interior Department issued the Anglo-Dutch company a permit allowing it to explore deeper into the ocean floor after granting Shell conditional approval to drill in May. The drilling will be the first exploration in the U.S. region of the Arctic in more than two decades; the area is estimated to hold some 26 billion barrels of recoverable oil which could significantly boost U.S. domestic oil production from its current level of 9.5 million barrels per day.
Here’s more on what this means for the company from the Associated Press:
The Bureau of Safety and Environmental Enforcement announced that it approved the permit to drill below the ocean floor after the oil giant brought in a required piece of equipment to stop a possible well blowout. The agency previously allowed Shell to begin drilling only the top sections of two wells in the Chukchi Sea because the key equipment, called a capping stack, was stuck on a vessel that needed repair in Portland, Oregon. Because the vessel arrived last week, Shell is free to drill into oil-bearing rock, estimated at 8,000 feet below the ocean floor, for the first time since its last exploratory well was drilled in 1991 … Shell bid $2.1 billion on Chukchi Sea leases in 2008 and has spent upward of $7 billion on exploration there and in the Beaufort Sea off Alaska’s north coast.
“Environmental groups condemned the decision, arguing that it goes against Mr. Obama’s stated commitment to addressing climate change and shifting away from fossil fuels like oil and natural gas toward renewable energy resources,” the Wall Street Journal notes. Shell will have until late September to drill before weather conditions make it too difficult. The company plans on investing $1 billion on top of the $7 billion it’s already plowed into scouring the Arctic for oil and natural gas, according to the Journal. So far the company has yet to discover any oil or natural gas there.

miércoles, 29 de julio de 2015

Inti Lantauro on Lower crude prices (Total Scenery).

PARIS— Total SA said aggressive cost-cutting and an increase in oil output helped offset the fallout from lower crude prices on its bottom line, as its net profit fell by less than expected in the second quarter.
The French oil company’s strategy for stubbornly low oil prices has been similar to other major energy companies: extract as much oil and gas from current operations while cutting back aggressively on all costs and reducing investment in long-term projects. Along with boosted revenue from units like refineries and petrochemical plants—which do well when prices are low—Total, like other majors, has shown signs of resilience in the face of a historic market collapse.
Total said Wednesday its net profit fell 4% to $2.97 billion in the second quarter from a year earlier, while revenue contracted 29% to $44.72 billion. When adjusted to exclude the effect of inventories and other nonrecurring items, the company’s net profit fell to $3.09 billion from $3.15 billion in the same quarter a year earlier.
The adjusted profit data was higher than the $2.75 billion median forecast of eight analysts polled by FactSet.
Profit would have fallen much more if Total hadn’t scrambled to raise output to an average 2.3 million barrels of oil equivalent a day in the second quarter, from 2.05 million barrels a day in the same period a year ago, the company said.
The company now pumps more crude than the U.K. oil giant BP PLC, which said Tuesday that it produced an average of 2.1 million barrels of oil equivalent a day in the second quarter. Total’s results also compared favorably with BP, which posted a $6.3 billion loss in the second quarter, mainly because of a settlement for the 2010 Gulf of Mexico spill.
Total remains under pressure from crude prices that have fallen by more than half in the past year, down to the low $50s for a barrel of Brent crude, the global benchmark, from highs of $114 a barrel in 2014.
Total and others have responded with a regime of severe cost cuts and delays to big projects.
Known for his cost-cutting record when he was running the refining and petrochemical unit, Total’s Chief Executive Patrick Pouyanné focused on slashing spending when he took over in November after his predecessor died in a plane crash.
“It is a bottom-up exercise, every manager at every level has been incentivized,” Chief Financial Officer Patrick de la Chevardière said in a conference call.
There are no small savings for Total, Mr. de la Chevardière said. The company squeezed providers from Brunei to Congo, optimized logistics and supply chains and cut unneeded spending wherever possible. In Angola, for instance, the company has ordered its boats servicing offshore oil rigs to go slower and save fuel, the CFO said.
Total has said it is on track to cut its costs by $1.2 billion this year. The firm added it expects three projects to start production later this year.
Total was also helped by its refining business, one of the largest in Europe. Refineries had been a problem child for Europe’s major oil companies, but with crude prices so low, the plants now get cheap feedstock and higher profit.
Operating profit for refining and petrochemicals jumped fourfold in the second quarter compared with the same period a year ago.
“We are very happy to have the resilience that comes with being an integrated company,” Mr. de la Chevardière told investors in a conference call.

jueves, 16 de julio de 2015

Canada energy producers scenery mid-2015

Canadian energy producers are giving up hoping for a big rebound in oil prices, preparing instead to embark on a course of belated hedging if crude prices edge just a few dollars higher.

    As crude markets collapsed during the first half of this year, Canada's oil producers held back on hedging on concern they would lock in prices at barely break-even rates.

    That may be about to change. A rally in U.S. crude CLc1 from $60 (38 pounds) a barrel today to about $65 could trigger a wave of selling from Canadian companies eager to build up protection against a second price slump, according to market sources in Calgary. Many allowed their hedging activity to lapse since last year, when oil tumbled to a six-year low near $42 a barrel.

   Canadian producers are between 10 percent and 20 percent underhedged compared with the same time last year, banking sources in Canada's oil capital estimated. For example, Canadian Natural Resources Ltd (CNQ.TO) had hedged around 10 percent of its production by early May; a year earlier it had already hedged more than half its output.

    It was not immediately clear which Canadian companies were gearing up for more hedging. Dozens of them routinely use derivatives contracts such as swaps or options to provide a guaranteed price on future oil production, often to appease lenders who want secure cash flow.

Some firms may also hedge simply because they fear oil prices may fall further, potentially dropping below the cost of production in the energy-intensive oil sands, where per-barrel operating costs can top $35, according to consultancy Wood Mackenzie.

   "A lot of guys are saying we don't want to hedge at the bottom of a commodity cycle so there's been some hesitation," said Jeremy McCrea, an analyst at AltaCorp Capital in Calgary. “Clearly everyone is wishing they had hedged last year more.”

    McCrea said a number of producers were looking to hedge at around C$80 ($65) oil, and that less than half the oil companies covered by his research team have a structured hedging policy, preferring to add protection when needed.

    One source at a major bank said at least one client has put in orders to transact on their behalf as soon as crude hits $65 a barrel. Another source at a separate bank said clients were holding off for levels closer to $65 before hedging for 2016.

    David Leben, a director in oil products trading with BNP Paribas' in New York, said some producers were looking for even higher levels, around $70 to $80 per barrel.

    That strategy has its risks, however. Global crude supply is still robust and if demand falters prices could slide again, leaving producers exposed before they have a chance to hedge.

    "Some large Canadian producers have taken the stance that they will do nothing until we reach higher levels," Leben said.



    Since oil prices started tumbling last June, producers have been reluctant to put on hedges in case a sudden recovery meant they missed out on potential hefty profits.

    But with crude trading between $57 and $62 a barrel since early May, many companies have accepted a return to over $100 a barrel is unlikely.

    Greater insurance could frustrate producer-group OPEC's aim of putting the brakes on North American crude output, part of the battle for global market share that saw oil prices more than halve over just a few months.

    There's a long way to go. As of May 6, Canadian Natural, the country's No. 1 independent crude producer and until recently one of the largest hedgers in Alberta, had only hedged about 50,000 barrels a day of production for the remainder of 2015, using price collars between $80-$120.54 Brent LCOc1, according to quarterly earnings statements.

    At the same time last year Canadian Natural had hedged approximately 297,000 bpd of forecasted 2014 crude oil volumes, more than half its production.

    The company declined to comment on its hedging policy.

    Heavy oil producer Baytex Energy Corp (BTE.TO) hedged about 62 percent of its West Texas Intermediate crude exposure at a weighted average price of US$99.47/bbl for the second quarter of 2014, but had only 33 percent of volumes hedged for the same period in 2015, mostly at a fixed price of $87.03 WTI.

    Baytex did not immediately respond to a request for comment.

    Many of biggest oil sands producers such as Suncor Energy Inc (SU.TO) and Husky Energy Inc (HSE.TO) do not hedge at all because their integrated refinery operations benefit from low crude oil prices.

(Reporting by Nia Williams in Calgary, editing by Jonathan Leff and John Pickering)

jueves, 12 de marzo de 2015

United States crude oil storage 2015 (Bloomberg)

Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.

As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.

Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.

If oil supplies do overwhelm the ability to store them, the U.S. will likely cut back on imports and finally slow down the pace of its own production, since there won’t be anywhere to put excess supply. Prices could also fall, perhaps by a lot. Morse and his team of analysts at Citigroup have predicted that sometime this spring, as tanks reach their limits, oil prices will again nosedive, potentially all the way to $20 a barrel. With no place to store crude, producers and trading companies would likely have to sell their oil to refineries at discounted prices, which could finally persuade producers to stop pumping.

Oil investors appear to be coming around to the notion that a lack of storage capacity could lead to another price crash. In the futures market, hedge funds have spent the past few weeks cutting their bets that oil prices will rise. Instead, they’ve built up a record short position, increasing their wagers that prices will fall. During a March 11 interview on CNBC, Goldman Sachs President Gary Cohn said he’s concerned the U.S. is running out of storage, particularly as refineries enter their seasonal maintenance period, to prepare for the summer driving season. Around this time they usually cut the amount of crude they buy. Cohn said prices could go as low as $30 a barrel.

The math on this can be a bit tricky. The U.S. Department of Energy measures oil storage capacity twice a year, once in the spring and again in the fall. As of September 2014, the U.S. had 521 million barrels of working capacity, up from 500 million in 2013. That includes the space inside tank farms and on-site at refineries. It doesn’t, however, include the amount of oil that can be stored in pipelines or storage tanks near oil wells; nor does it include the amount of capacity in tankers off the coast, in transit from Alaska, or on trains. Of the 449 million barrels of total crude stocks, about 327 million are stored in tank farms or on-site at refineries.

According to data from the Energy Information Administration, the U.S. is using about 63 percent of its storage capacity, up from 48 percent a year ago. “We have more space than some people tend to believe,” says Andy Lipow, an energy consultant in Houston. The most recent estimate of storage capacity also doesn’t include tanks built since September in North Dakota, Colorado, Wyoming, and Texas, he says.

Still, the amount of space available in the tanks at Cushing is getting tight. The storage hub will run out of room by Memorial Day, says Stephen Schork, who runs energy consulting company Schork Group. As long as oil stays cheap, he says, traders have an incentive to store it. Cushing has room for roughly 71 million barrels of oil, up from about 50 million in 2010. One of the biggest owners of tanks there is Canadian energy distributor Enbridge. “We don’t have much room left, but we’re still answering the phones,” says Mike Moeller, who manages the company’s Cushing tank farm. “Not everybody who calls is going to get space.” He says monthly lease rates in the spot market have gone from dimes per barrel to more than a dollar in some cases.

“These producers have kept chugging away when they should have been shutting down”

Even with prices less than half what they were last summer and storage capacity growing scarcer, U.S. oil output has continued to rise. Through February, U.S. daily crude production reached 9.3 million barrels, about 1 million barrels more than a year ago. The massive storage buildup has provided oil companies with a phantom demand for their crude. Many hedged production before prices got too low, taking out futures contracts that guarantee a certain price. That’s allowed them to sell oil for a price higher than the going rate of $49 a barrel, keeping many profitable despite lower prices.

Running out of room inside the nation’s storage tanks might be the only way to keep companies from pumping more oil. “These producers have kept chugging away when they should have been shutting down,” says Dominick Chirichella, co-president of the Energy Management Institute, a New York-based advisory group. “At some point, the fact that supply is outstripping demand has to have its moment of truth.”

The bottom line: A record 449 million barrels of oil are being stored in the U.S. Shrinking storage capacity might lead to another drop in prices.

miércoles, 14 de enero de 2015

My friend Alberto Quiros Corradi (1931-2015) By Gustavo Coronel.

In memoriam

My friend Alberto Quiros Corradi (1931-2015)
By Gustavo Coronel.

Those were different times , we were both active in the oil industry. I met him in Lagunillas , by late 1950. From then until today , the day of his death, he brought us a close friendship. It was a symmetrical friendship affection, we had a deep mutual affection , but asymmetric in talent. Alberto always saw as my superior, not only hierarchical but brainpower. I had the pleasure and privilege of sharing with him many hours of analysis of our industry, our company and our country. Always had the virtue of owning an original perspective, a fresh perspective , always mounted in their particular intellectual helicopter, from which you could see all sides of the situation. While I was scratching the surface as he walked into the depths of the problem and its ramifications. I learned a lot at his side , first with Shell, then with Maraven and Petroleos de Venezuela , where we participated in big initial decisions on Streamlining business , changing pattern Refining, the future of the Orinoco Belt plans exploration and early Conventions Technology and Marketing . Uncountable these activities but will never forget our meeting with the high command of Shell in London to negotiate the Technology Contracts and Marketing . To them we attended Alberto Jorge Zemella , Arnoldo Volkenborn and me. From an initial position of Shell 's $ 70 million per pack, we reducirl the cost to $ 42 million , aided in planning the strategy , in which they had participated in Caracas a couple of bright young people who then had extraordinary careers professionals in other fields : Moises Naim , his PhD from MIT back under his arm and Raul Arriaga.
For years I sat near Albert on the Boards of Maraven and PDVSA (where he often attended because of his position as president of subsidiary ) and always felt very identified with their views . We had a similar outlook on life , seemed to think the same even if we had not put us previously agreed . This was because of , perhaps , with similar origins , both from a modest middle class but with huge desire to progress . Alberto was very poor young but was always sure not stay long in those rows. He began loading tubes in La Concepción and ended his career at the top of their companies , president of Shell Venezuela , Maraven , Lagoven and , had it not been for the intrusion of politics , had become president of PDVSA , position for which he was eminently qualified . We will have time on another occasion to expand on what was a brilliant career. Now, under the shock of his death , I can only add some other considerations about what Alberto Quirós meant in my life.
By becoming friends we discovered some interests in common who joined us for the 60 years of close friendship. We met on Sunday to play billiards ( I earned more than I beat him ) at home or elsewhere . We were not reluctant to go to play in unsavory places near the Nuevo Circo or in Maracaibo , in unsafe places but we never did anything. We were big fans of boxing and traveling to Maracay , Maracaibo or USA, to see fight to Ramon Arias, Betulio and sinning optimistic , a link to Obelmejías in the Hagler fight . We were going to baseball frequently. Along with César Prato and Eduardo Serrano, the author of " Barloivento " you had taken music at home. There I remember alternated up with Pedro Vargas. Our friendship was , you might say , fraternal . Alberto had no brothers and somehow took me like a younger brother . Our friendship was marked by generosity and selflessness. It helped me and helped both in hard times. When I had to leave the oil industry for a confrontation with the sector minister ,, on unfair terms , Alberto brought together the presidents of subsidiaries and met with the president of PDVSA , the General Rafaél Alfonzo Ravard and got a decent treatment for my output, which had been ordered to political levels just a year of my retirement. This allowed me to make an orderly transition to other activities, since I had always been in the oil industry, even before my graduation as a geologist ( Shell Fellow at the University of Tulsa )
My life was closely linked to the life of Alberto Quiros Corradi and always admire his broad vision of life, his encyclopaedic culture and people skills . All his life to his childhood friends , Ramón Monzant , Albertico Moran, the ñato Carrillo and friends acquired during his career , as was manuvo faithful .
Alberto touched hundreds of people with their friendship and generous treatment . I always knew how to take their partners the best they could give. Many mourn his death today. I cried, I am feeling that his departure is like take away a big chunk my life.

They were years of fraternal friendship .

Today I pay tribute to my boss, my friend , the great Alberto , who I will never forget for the remainder of my life.

viernes, 9 de enero de 2015

Angel Garcia Banchs: Venezuelan Oil Economy in Emergency.

I insist on the need to alert Venezuelans about the economic emergency facing our country. The economy is in a situation characterized by chaos, disorder, confusion and widespread panic breeding ground for social upheaval that looks increasingly harder to avoid. The reason would be the lack of courage, for making basic decisions of economic policy by the national government, decisions are not taken immediately lead, according to our estimates, the widespread disappearance of inventories (general corporate disinvestment) in the month April.

It is well known that he will not, because his hands tied mobsters and corrupt. But still it must be emphasized recommend to the national government to immediately lift exchange controls and price, if indeed you want to avoid a crash. Doing it in February and would be very late, so it is suggested to do it now. Otherwise, shortages in the country today will look like child's play compared to what could be experienced in the months of March and April. In that case, it would not be specific or particular set of goods, but widespread, massive, not only in the regions, but in the capital.

To lend attention, lifting of exchange control is recommended to be primarily via a total adjustment in the exchange rate, minimizing adjustment via the real interest rate.

Anyway, controlling change and prices will explode, because that is the only way to replenish inventories and recapitalize companies, via an abrupt decrease in aggregate (ie the consumer) demand, so as to accommodate the scant offer.

There is the possibility to prevent the emergency, the economy through intensive therapy. In plain words, there is minimal chance of avoiding a shock or social unrest. Given its refusal to act, apparently, only a timely political change could be achieved.

Ángel García Banchs, PhD.

martes, 6 de enero de 2015

Blake Clayton Analysis on US Oil Exports. (CFR)

By: Blake Clayton (Fellow for energy and national security at the Council on Foreign Relations)
Federal lawmakers should overturn the ban on exporting crude oil produced in the United States. As recently as half a decade ago, oil companies had no interest in exporting U.S. crude oil, but that has changed. Oil production has grown more in the United States over the past five years than anywhere else in the world, even as domestic oil consumption has declined. With these changes has come a widening gap among the types of oil that U.S. fields produce, the types that U.S. refiners need, the products that U.S. consumers want, and the infrastructure in place to transport the oil. Allowing companies to export U.S. crude oil as the market dictates would help solve this mismatch. Under federal law, however, it is illegal for companies to export crude oil in all but a few circumstances. Over the past year, the Department of Commerce granted licenses to several oil companies to export a small amount of U.S. crude oil. But these opaque, ad hoc exceptions are insufficient. Removing all proscriptions on crude oil exports, except in extraordinary circumstances, will strengthen the U.S. economy and promote the efficient development of the country's energy sector.

The Issue

When Congress in the 1970s made it illegal to export domestically produced crude oil without a license, the goal of the legislation was to conserve domestic oil reserves and discourage foreign imports. In reality, the export ban did not help accomplish either of these objectives. It has now become more of a hindrance than a help. The opaqueness of the export approval process discourages would-be exporters from applying for licenses. Companies see a lack of legal clarity and fear inconsistent regulation. They are hesitant to incur negative publicity on Capitol Hill when they doubt they will be granted approval.
Two important elements of the U.S. oil export equation have changed in the past few years. First, exporting U.S. crude oil has become economically attractive to the energy industry. Crude oil exports have grown from next to nothing in 2007 to around one hundred thousand barrels per day in March 2013, all of which went to Canada. Second, the United States has become one of the world's largest gross exporters of refined oil products, such as gasoline and diesel. Unlike crude oil, which is unprocessed, oil that has been refined can be exported freely under U.S. law. Roughly three million barrels per day of refined oil products were exported in December 2012, a major increase from prior decades. Until 2011, the United States had not been a consistent net exporter of oil products since 1949.
Restrictions on crude oil exports are already beginning to undermine the efficiency of the U.S. oil economy. Much of the country's rapidly growing production of light crude oil, including lease condensates (i.e., ultra-light oil), comes from either areas where refiners are not interested in or able to process it, given that many U.S. refineries are configured to run lower-quality crude oil, or in parts of the country with inadequate transportation infrastructure. With few viable domestic buyers, producers are forced to choose between leaving oil in the ground and pumping it at depressed prices. These artificially low prices slow additional U.S. crude oil production. New refineries and pipelines currently under construction will help remedy some of these market distortions over time, but a simpler, more cost-effective solution would include allowing U.S. crude to be exported. Doing so will not raise gasoline prices. Prices at the pump will continue to be determined by the global market, regardless of whether the United States exports crude oil. Were the ban overturned today, crude exports would immediately rise by several billion dollars a year, according to industry executives, likely surpassing five hundred thousand barrels per day by 2017.

U.S. Law Governing Crude Oil Exports

The primary laws prohibiting crude exports are the Mineral Leasing Act of 1920, the Energy Policy and Conservation Act of 1975, and the Export Administration Act of 1979. The so-called short supply controls in the Export Administration Regulations (EAR) of the Bureau of Industry and Security (BIS), an agency of the Department of Commerce, spell out these restrictions.
A few obscure types of crude oil automatically qualify for export licenses under EAR. These types include crude oil produced in Alaska's Cook Inlet or exported to Canada, as long as it is consumed there; and small amounts of heavy (or viscous) crude oil produced in California. Other niche cases do not require licenses. Crude oil transported via the Trans-Alaska Pipeline System or produced overseas and stored in the U.S. Strategic Petroleum Reserve may be exported.
Some U.S. crude oil can be exported with a presidential finding. This includes crude oil of U.S. origin transported on federal right-of-way pipelines, crude oil produced from the outer continental shelf, and crude oil produced from naval petroleum reserves that were once set apart for use by the military but that are now almost entirely commercialized.
In nearly all other cases, U.S. crude oil can only be exported if the BIS finds that proposed exports are "consistent with the national interest and the purposes of the Energy Policy and Conservation Act." The agency has the right to accept or reject applications for an export license according to its own unarticulated definition of the "national interest." The only specific case the EAR mentions as meeting these strict criteria is when the exported crude is exchanged for more or better refined oil imports, under a contract that can be terminated if U.S. oil supplies are "interrupted or seriously threatened," and could not have "reasonably [been] marketed" in the United States.

A Better Approach

A better approach would be to allow companies to freely export oil as the market dictates, eliminating the requirement that companies obtain a license for each crude oil export transaction. The only exception to this policy should be when the president determines there is a national emergency. To make this change, Congress should repeal EAR's short-supply controls that apply to crude oil exports.

Benefits Versus Costs

Exporting energy is good for the economy. Crude oil exports could generate upward of $15 billion a year in revenue by 2017 at today's prices, according to industry estimates. Those gains would be partially offset by displacing some refined product exports, however. Today's export restrictions run the risk of dampening U.S. crude oil production over time by forcing down prices at the wellhead in some parts of the country. Letting drillers reap extra profits from selling crude oil overseas, if the market dictates, would provide greater incentives for drilling, stimulating new supply. It would also encourage investment in oil and gas production in the United States rather than abroad. In oil-producing regions, more workers would be hired for oil exploration and production, as well as for local service industries. Greater policy certainty regarding exports would also catalyze the expansion of U.S. energy infrastructure.
As it stands, the primary beneficiaries of the export ban are a few fortunate oil refineries in the central United States—not U.S. consumers—that are able to buy crude oil at depressed prices before selling it at prevailing market rates. Current law arbitrarily works to the benefit of these companies. In several years, a wider range of refineries will benefit from the ban as pipeline capacity constraints are alleviated and more light oil flows to the U.S. Gulf Coast. These pipelines will help reduce the discount that some producers face in the domestic market, but they would be more effective at bringing domestic oil prices in line with global ones if U.S. crude oil could be freely exported and other restraints on shipping were removed.
Allowing crude oil exports will not affect U.S. energy security. Proponents of the export ban might argue that it increases national security by slowing the depletion of U.S. oil fields. Yet the ban also slows production growth, increasing the country's reliance on imported energy. Insofar as oil self-sufficiency would be economically and militarily useful in a time of crisis, removing the ban would increase U.S. security by catalyzing oil production. Were an international emergency to arise, exports could be temporarily suspended, providing extra oil for domestic needs, though such extreme measures would likely hurt U.S. trade relationships.
Liberalizing the crude oil export regime would advance U.S. foreign policy. It would demonstrate Washington's commitment to free and fair trade, even in a politically sensitive sector, bolstering its negotiating position on other trade issues. It would also avoid putting Washington at odds with allies that would like to source their oil from the United States. If the United States were to become a major crude exporter, its leverage as an oil trade partner would grow significantly.
To the extent that exports mean greater domestic production of tight oil from hydraulic fracturing, or "fracking," allowing exports could bring environmental risks such as water contamination and local pollution. These risks, however, are manageable through prudent regulation. Continuing to ban crude oil exports is not an effective means of preventing harm to the environment. Environmental regulators will need to manage the risks of oil production regardless of whether the United States exports more crude oil.


Without compelling reasons for continuing to restrict crude exports, and given the potential benefits, Congress should liberalize the crude oil export regime. Republicans and Democrats alike, including President Obama, express support for boosting U.S. exports in general. Crude oil should be no exception. Some observers might object to exports on the grounds that U.S. oil production could fall short of today's optimistic forecasts or that exports will cause gasoline prices to rise. These should not be major concerns. U.S. crude exports are self-limiting: if the supply gains expected do not materialize, the market will induce producers to keep the oil at home rather than to send it abroad. Though the companies that benefit from today's export restrictions might oppose any change in the status quo, the broader gains available to the United States from allowing crude exports make it the far better choice.

Mr. Blake Clayton is fellow for energy and national security at the Council on Foreign Relations.