Crude Oil exports from U.S. - A recent welcome development!

Mineral oil, now known as crude oil was accidently discovered in Pennsylvania (US) in 1848. The first oil well was drilled in the same location in 1859 and commercial production commenced in 1860. Exports of crude oil by sea commenced in 1861, when a wooden hulled sailing ship, “Elizabeth Watts” carried a full cargo of oil and economic development US became the largest consumer of crude oil (in barrels) from US to UK across the Atlantic.

With industrialization and economic development US became the largest consumer of crude oil. For over a century, US were both an exporter and importer of crude oil, but owing to its high domestic consumption has been a new importer.

Exporting domestically produced crude oil made US an important participant in the global crude oil market, which sets crude prices. This ended in the 1970’s when, in response to the 1973 oil embargo crises, a ban on domestic oil exports was imposed.

Since then, the ban has continued and with growing domestic consumption, declining production for decades, the dependence on imports increased, and made exports unthinkable. Developments of new technology, horizontal drilling and hydraulic fracturing have squeezed torrents of oil from shale rock deep underground. This has resulted in production of more oil in 2013 than ever before and production surpassed imports for the first time in over two decades.

In June 2015, US surpassed Russia and Saudi Arabia to become the world’s biggest producer of crude oil and gas. The next logical step was obviously to lift the ban on exports. However on account of high domestic consumption, US still will be an importer of oil though imports have reduced by about 50% over the last five years.

Now in a historic move considered unthinkable even a few years ago, US has lifted a 40 year ban (1970’s) on export of crude oil and exports of crude oil have commenced. This would be beneficial for energy deficient countries, such as China, Japan, Korea, India, etc. as it would provide one more source for crude oil imports and also have a moderating and stabilizing effect in global oil prices in the long term.