Crude oil exporter
By Isaac Cohen*
The bipartisan approval last week of a US federal budget of $1.8 trillion, containing both tax cuts and spending increases, included also the elimination of the 40 year US prohibition of crude oil exports.
Approved after the first oil embargo of 1973 amid declining domestic production, for almost 40 years, US producers were not allowed to export crude oil. With the adoption of new technologies and the spectacular increase in domestic production of shale oil, this year, the United States regained the production level of 9.3 million barrels per day (bpd), from 5 million bpd in 2008.
This has contributed to an oil glut, amid the economic slowdown in emerging market economies, particularly in China, which has unleashed a battle for market share among the world’s main oil producers. True, US oil production is projected to decrease next year to 8.8 bpd, but it still will be the third major oil producer, behind Russia and Saudi Arabia.
With the exception of minor exports, authorized in 2014 of slightly processed light oil, known as condensate, the US has been absent from world oil markets. This will change in 2016. Together with the expected return of Iran’s exports, as a result of the lifting of sanctions approved in the recent nuclear power negotiations, both will contribute to increase the abundant oil inventories, which have pushed prices under $40 per barrel.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.