American drillers are fretting over an oil boom that is out-pacing demand and pushing prices down, feeding the export ban debate and pushing it critically forward.

There are conflicting reports that domestic fields will add an unprecedented 1.1 million barrels a day of output, while consumption is expected to shrink to its lowest levels since 2012, and counter-reports that insists that a crude oil tanker that left Texas in late July, bound for South Korea, is a sign of the changing times.

The tanker, Singapore-flagged and leaving from the port in Galveston, Texas, was carrying 400,000 barrels of crude oil and was apparently the first “unrestricted export of American oil to a country outside of North America in nearly four decades.”

The two stories are certainly related – even if there is a month-long gap in the timing. West Texas Intermediate crude, the US benchmark, is down 24 per cent since mid-June, and on October 2, it fell below $90 per barrel for the first time in 17 months. Drillers are panicking over the specter of declining operating capital, and being able to export crude is the only outlet if oil prices continue to fall, while demand weakens.

Ben van Beurden, Shell’s chief executive officer isn’t buying into the panic, however. He says he is confident that oil will return to “very robust pricing in the long-term.” Others are banking on a particularly harsh winter, supply cuts from OPEC countries, and continued geopolitical volatility in the Middle East and North Africa to bring oil prices back towards $100 a barrel. For those not eyeing the prospects of freezing and conflict, though, exports are the saving grace.

An energy historian said the export of oil to South Korea, “symbolizes a new era in US energy and US energy relations with the rest of the world.” Under the ban of crude exports, refineries benefit from the processing largesse, but there is growing support to lift this ban in a changing world – and in light of the shale revolution, which has led to an increase in drilling by around 70 per cent over the past six years. While supporters of the ban say that crude exports could lead to a rise in gasoline prices and heating costs, critics of the ban say it would help stabilize oil prices.

The next word on the issue will come in about a month, when the Energy Information Administration, EIA, releases a much-anticipated report on the potential impact of lifting the ban. It won’t be the final word, but it is expected to determine the shape of this debate and to significantly influence its outcome at a time when oil prices are tumbling and confidence of a rebound is shaky.

Folashade Olubayo
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