WHO IN 1975 WOULD HAVE THOUGHT WE WOULD HAVE AN OIL GLUT TODAY?

Posted on October 20, 2014 by Michael Hardy

In the mid-1970’s, the nation faced long gas lines,  the rationing of heating oil supplies, 55 miles per hour speed limits on the highway, the curtailment of holiday lighting, and the uncertainty of sufficient supplies of petrochemical feed stocks for industry.  Pundits routinely predicted dire forecasts of shivering residences, financial dislocations, and geo-political struggles between the United States and the OPEC suppliers.  Against this backdrop Congress banned most crude oil exports under the Energy Policy and Conservation Act of 1975.

With the emergence of unconventional drilling techniques, colloquially described by the shorthand term ”fracking”,  the nation recently began to see growing  supplies of natural gas and oil.  Last year’s Annual Meeting of the American College of Environmental Laws featured a timely panel discussion on the environmental and economic issues associated with (1) the conversion of underutilized LNG import  terminals into LNG export terminals, (2) the development of massive port terminals in Washington, Oregon, and Louisiana for coal exports to Asia, (3) the increased emission of the potent GHG methane from the higher level of drilling activity, (4) the downstream effects on rural communities that have become the homes of these “shale plays,” (5) the construction of massive mid-stream facilities and transmission lines ( like the Keystone XL pipeline in areas thought to be sensitive because of their habitat for endangered species and their location near valuable water supplies), and (6) the safety risks of the increased use of rail transport for crude oil.  An executive with one of the major oil companies reports that oil production in the United States has jumped 50% since early 2011.  The Energy Information Administration recently stated that United States oil production is expected to reach its highest level since 1970; this increase is occurring at a time when domestic oil consumption is declining.

Major oil companies, the U.S. Chamber of Commerce, the American Petroleum Institute and others have called for an end to the 40-year old ban on oil exports.  Those calls have coincided with increased congressional interest from both House and Senate members in lifting the ban.

With the “sea change” in the domestic oil production picture, the administration of President Obama has begun to look at possible repeal of the 40 year- old - ban on crude oil exports.  Energy Secretary Ernest Moniz recently addressed the Council on Foreign Relations on the current efforts to assess the “very different” oil market when the ban went into effect.  A link to his 50 minute presentation on You Tube is found below.  (The Secretary’s presentation touches on a wide range of topics, but his discussion of crude oil exports begins approximately 20 minutes into the address).  Secretary Moniz did not give a time frame for a decision, noting that the nation remains a significant importer at this time.  He said the final decision may turn on the market impacts.  As of the date this blog piece is written, the price for oil has reached a very low point, in part due to the glut of new domestic supplies, to a level that calls into question the economics of new well completions with unconventional drilling techniques.  The 50 minute speech also touches on other subjects, including the progress made in reducing methane emissions from leaking infrastructure, greater water recycling,  more effective well completion requirements, as well as the improvements in the solar energy as a way to meet the nation’s goal of a low-carbon economy, and the plans for the U.S. to announce its climate change pledge in the first quarter of 2015. 

Video: Energy Secretary Ernest Moniz on U.S. Energy Policy