A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013. The vast Monterey shale formation is estimated by the U.S. Energy Information Administration to hold 15 billion barrels of technically recoverable oil, or four times that of the Bakken formation centered on North Dakota. Most of that oil is not economically retrievable except by hydraulic fracturing, or fracking, a production-boosting technique in which large amounts of water, sand and chemicals are injected into shale formations to force hydrocarbon fuels to the surface. Picture taken April 29, 2013. REUTERS/Lucy Nicholson (UNITED STATES - Tags: ENERGY BUSINESS TPX IMAGES OF THE DAY) - RTXZ5IX© Lucy Nicholson / Reuters/Reuters
Since 1975, the U.S. has had a near-total ban on oil exports. The Obama administration is weighing whether to ease it. Any policy change is bound to raise the ire of American politicians who fear this means further dependence on foreign oil and higher domestic prices, but the move makes eminent economic sense – for Americans, and for the global oil market.
U.S. output has been soaring as a result of hydraulic-fracturing technology that has released a flood of shale oil and gas. The International Energy Agency says that the United States is poised to become the world's biggest oil producer in the next few years.
The growing domestic supplies still fall well short of delivering complete U.S. energy independence. But the large pools of light, sweet shale oil are far in excess of what the concentration of U.S. refineries on the Gulf Coast can handle. Many of these are designed to process heavier oil from Canada and other foreign producers, which is why they are so eager to see the Keystone XL pipeline built.
Some of the light oil is being shipped from the Gulf to eastern Canadian refiners under special permits. Refineries on the U.S. East Coast are also better equipped to deal with the lighter grades, but can't easily access the output from North Dakota or Texas shale deposits, because of the absence of a pipeline network.
The answer to the glut of American light oil lies in the export market, where demand is strong and prices higher. U.S. oil would also help address some of the serious imbalances in the global market. The U.S. becoming an oil exporter would have the added benefit of putting pressure on Russian President Vladimir Putin, by reducing Moscow's grip on European energy needs.
All of this will be a tough sell, particularly in an election year. The last thing politicians want is to explain to angry voters why U.S. oil is flowing abroad rather than being used to bring down gasoline prices at home. And that's how critics, including some of President Obama's fellow Democrats, will frame the discussion around exports. They're missing the big picture. Producers and consumers alike would be better off with a freer, more efficient oil market.