For oil producers throughout the U.S., a new era of U.S oil exports begins. Less than two weeks after President Obama signed legislation lifting a 40-year ban on exporting U.S. crude oil, ConocoPhillips and NuStar Energy LP began loading their Italy-bound cargo ships with the first freely traded U.S. crude oil in 40 years.
The two companies surpassed efforts made by Enterprise Products Partners LP to be the first U.S. exporters of the precious fossil fuel since the U.S. banned exportation in 1975. Cargo ships left the port of Corpus Christi in their News Year’s best December 31st to greet their buyer, Switzerland-based Vitol Group with Eagle Ford light crude oil/condensate.
The oil-trading powerhouse plans to refine the crude in their subsidiary’s refinery in Cressier, Switzerland.
The U.S. lifted restrictions as part of a budget deal to prevent another government shutdown on December 18 by the U.S. Senate. Originally the ban served as an attempt to curb the impact of future oil embargos by foreign producers during the mid-70s recession.
Such news leaves positive sentiments to those in the oil industry. NuStar energy, which owns various port terminals across the country, including Corpus Christi, invested heavily in recent years to expand its South Texas Pipeline System to transport crude from the Eagle Ford Shale to the port.
Based on these investments, CEO Brad Barron claims NuStar, “Plans on further expanding [their] Corpus Christi operations to provide more options for customers to move Eagle Ford Shale crude either domestically or internationally.”
And for the South Texas Eagle Ford Shale oilfield, this could become quite a lucrative opportunity. Because the oilfield produces crude low in sulfur, analysts believe it will sell at a premium in international markets. If they turn out to be correct, oil that currently sells for $30-40 domestically (roughly the cost of production) could procure much more than that abroad.
However, not everyone in the industry supports the decision.
U.S.-based refiners enjoyed the benefits of cheap domestically-produced crude oil before selling it at a higher global price. Because of the ban on domestic oil, refiners could essentially name their price since companies like Phillips 66 were restricted from selling abroad.
Now, with the ban lifted, the U.S. Energy Information Administration expects that with a rise in crude prices, refiners will cut jobs and suffer a loss of $22 billion in annual profits by 2025.
Lawmakers are currently looking to ease this pain point by offering tax credits to the affected refiners, especially in the Northeast.
On the flip side, proponents claim the lift will inject additional revenue into the economy while increasing American soft power – limiting the reliance of American allies on oil-producing rivals like Iran and Russia.
For the answer, only time will tell.