The U.S. exports a lot of things—automobiles, watches, umbrellas, blueberries, and a myriad of other products. In all, the country exported $2.1 trillion worth of goods and services last year. But not crude oil, and very little liquefied natural gas (LNG).
That is set to change this year.
American Crude Oil Exports
Late in 2015, Congress voted to end a four-decades-long ban on crude oil exports, and President Barack Obama subsequently signed the bill into law.
While the president can still limit exports in cases of national emergency, the legislation allows domestic oil producers the same rights as producers of just about any other products. In this case it means making some of the more than 9 million barrels of U.S. daily oil production available for sale abroad, not to mention the 490 million barrels held in commercial storage tanks.
Although the current bout of low oil prices is keeping some new capacity offline, it shouldn’t prevent America from growing its energy exports over time. The energy business is shaped by long-term fundamentals, and most projections show major growth in the world’s appetite for energy.
ExxonMobil’s latest Outlook for Energy report predicts global energy demand will grow by 25 percent between 2014 and 2040, with much of that demand coming from emerging markets such as China and India. While renewables will expand their footprint in the coming decades, conventional fuels like oil and gas will still account for 60 percent of global energy supplies a quarter century from now.
Helping to meet the world’s growing demand by allowing U.S. energy producers to export energy will strengthen the American economy. Various estimates, including a recent study by the American Petroleum Institute, anticipate oil exports could trigger nearly $750 billion in new investments and support close to 1 million additional jobs over the next few decades. Moreover, most studies find that expanding crude oil exports will put downward pressure on gasoline prices.
Quite a change from the 1970s-era fears about rising imports and scarcity of resources.
What about LNG?
There is no official prohibition on natural gas exports. However, a regulatory bottleneck requiring a public-interest determination for American companies seeking to export liquefied natural gas has significantly hampered these efforts. The rules holding up LNG exports are rooted in policymakers’ fears about domestic natural gas shortages, some dating back to the Great Depression. But even as recently as a decade ago, officials in Washington encouraged construction of expensive facilities to import natural gas from abroad amid worries that domestic production had plateaued.
The situation has flipped in just a short time. Thanks to increased domestic natural gas supplies from areas such as the Marcellus Shale, the U.S. now produces enough natural gas to meet domestic needs with some left over.
The U.S. Energy Information Administration actually anticipates 2016 domestic natural gas output to rise to more than 81 billion cubic feet per day, up from 79.5 billion cubic feet per day in 2015.
Consumption for 2016 should average 76.6 billion cubic feet per day, up slightly from the 76.4 billion cubic feet daily in 2015, but still well below domestic production. On the global scene, ExxonMobil forecasts global demand for natural gas to surge by 50 percent between 2014 and 2040.
Excess domestic capacity combined with surging international demand means that gas producers could be in a strong position to market U.S. natural gas overseas, assuming the government removes some of the regulatory hurdles.
A number of LNG terminal operators have decided to bet on gas exports by building export facilities. One such proposed project involving ExxonMobil is Golden Pass Products in Texas, a potential $10 billion investment to add export capabilities. These capabilities would give Golden Pass the flexibility to export as well as import natural gas in response to market conditions. The timeline at the bottom of this page shows the regulatory hoops that ExxonMobil and its partners have had to jump through in order to earn permits to begin building.
Just like with crude oil exports, numerous studies and analyses in recent years have suggested that increasing LNG exports would yield tremendous economic benefits for the United States. With luck, federal officials will take steps soon to promote LNG exports rather than hold them back.
Last year ExxonMobil’s Outlook for Energy projected a major shift in global energy markets. The report suggested that by 2020 North America will be a net energy exporter for the first time in recent history, with the U.S. making a significant contribution thanks to new supplies of oil from shale fields in North Dakota and Texas. The report was also bullish on the potential for the U.S. to export significant amounts of natural gas, all the while having enough supplies to meet demand here at home.
These are extraordinary developments that show just how far the U.S. has come in a short time.