Originally Published in the Financial Times
By Gregory Meyer in New York and Ajay Makan in London
The boom in US oil production unleashed by new shale drilling techniques is in jeopardy unless Washington urgently reverses its more than three-decade old policy of restricting crude exports, the head of the Western countries’ energy watchdog has warned.
Maria van der Hoeven, head of the International Energy Agency, said a de facto ban of most US crude oil exports was helping create a glut in the central US, depressing domestic oil prices and curtailing investment.
“Washington will need to address this misalignment, lest the great American oil boom goes bust,” she writes in today’s Financial Times.
The US is the most powerful of the 28 members of the IEA, founded in response to the first oil crisis of 1973-74. With her comments, Ms van der Hoeven wades into a contentious debate in Washington as domestic refineries struggle to handle a torrent of high-quality light oil.
Exporting US crude requires a licence from the Bureau of Industry and Security, a branch of the Department of Commerce. While the US has become an important exporter of refined products such as diesel, only a trickle of crude leaves the country for Canada.
The glut in some regions of the US and Canada is now so large that the price of some crude varieties has fallen to as little as $50-$60 a barrel. Brent, the international benchmark, is more than $116 a barrel.
Ms van der Hoeven, a former Netherlands minister of economic affairs, wrote: “While much of the anxiety about energy resources in recent years has focused on ‘peak oil’ or other aspects of resource scarcity, in fact some of the bigger challenges facing the energy industry lurk not below ground but above.
“Some may see this as a choice between keeping American oil within US borders for reasons of economic security, and allowing the US to generate billions of dollars in new export revenues. But market realities suggest a far simpler decision ahead: either US crude is shipped abroad, or it stays in the ground.”