U. S. lifted a four-decade oil export ban

article-image

The United States decided to make a historic move and lifted a forty-year long ban on oil export. Mentioned restriction was a response to the Arab oil embargo in 70s which caused heavy shock to US economy. This was a solution to keep oil price on a relatively constant level in the future and also to secure the energetic sector of the country. Latest increase in oil production was the main reason why congress decided to lift the oil export restriction.
The United States currently generate about 9.2 million barrels of oil a day, about half of which is shale production, but the US also imported about 7 million barrels a day this year. With the world flooded in crude, nobody expects much demand for US exports. While new oil exports are not likely to amount to much immediately, they would provide another challenge to already sick OPEC. The Organization of the Petroleum Exporting Countries has been allowing the market forces to set prices for the past year, abandoning its previous policy of manipulating prices through the use of output quotas. That policy has cut into some US production,but the world is still overproducing by more than 1 million barrels a day.
This move is definitely an improvement, but is unlikely to have an influential impact on the global oil market. Andy Lipow of Lipow Oil Associates argued that the benchmark of the US crude is too close in price to the Brent’s. “The narrow price gap doesn’t encourage exports from the US to other parts of the world when transportation costs are factored in”, Lipow said.

crude-oil-pipe-NNPC.jpg1_-640x431

 

Sources:

http://www.wsj.com/articles/congressional-leaders-agree-to-lift-40-year-ban-on-oil-exports-1450242995

http://www.bbc.com/news/business-35136831

 

About author