U.S. Energy Information Administrator Guy Caruso (R) compares notes with U.S. Chamber of Commerce Institute for 21st Centery Energy Managing Director Karen Harbert (C) as Deutsche Bank Chief Energy Economist Adam Sieminski looks on before they testify to the House Select Committee on Energy Independence and Global Warming about ‘The Future of Oil’ June 11, 2008 in Washington, DC.
Addressing a Bipartisan Policy Center conference on EIA’s Annual Energy Outlook (AEO 2012), Administrator Adam Sieminski noted most of the new shale oil is light sweet crude, while oil refineries in the US Gulf region have been equipped to handle heavy sour crudes.
Light sweet crude is low in sulfur, flows easily, and produces larger fractions of gasoline and diesel when refined than sour crudes that have more sulfur and higher viscosity. But the better quality oil also costs more, so it is usually economic for refineries that can process heavy crudes to buy the lower-cost feedstock.
The idea of crude exports “should not automatically be taken off the table,” Sieminski said, adding there are times when it could make sense. US producers could export light sweet crude while importing heavier crudes to use in Gulf Coast refineries.
US imports have dropped from 60% of consumption in 2006 to 45% in 2011 and could drop below 36% by 2035, he said.
Economic and Infrastructural Justification
Free trade, in general, is good for the economy, said Sieminski, who was Deutsche Bank chief energy economist before taking over at EIA. Refining adds jobs to the manufacturing sector, he noted.
Considering exports could aid in resolving bottlenecks in getting new oil out of the northern and midcontinent US, Sieminski said the US pipeline infrastructure was built to move products from the Gulf Coast northward, and big changes are needed to rearrange that flow.
The bottlenecks have reduced the prices inland producers are getting for their oil.
US law essentially bars crude oil exports in most circumstances, but has few restrictions on exporting refined products like gasoline and diesel.
Sieminski noted the US last year became a net exporter of refined products, and that some exports of natural gas, as liquefied natural gas (LNG), have already been approved. LNG prices in Asia are running five times the price of natural gas in the US.
In addition, US coal exports went up more than 30% last year, he said, “so the US economy is well positioned to benefit from a resurgence” in energy exports.
“We shouldn’t just reject exports outright without a thorough analysis,” he said.
Plans to Export Natural Gas Advance
LNG exports have been controversial in Congress, where Rep. Edward Markey (D-MA) has led so-far-unsuccessful efforts to ban them, arguing the government should keep the resource here and keep the price to consumers low.
The Department of Energy has authorized exports from one terminal, Cheniere Energy’s Sabine Pass, but is waiting to rule on 10 other requests until studies of the potential effects of exports on domestic natural gas prices are completed.
Read the Federal Energy Regulatory Commission Order authorizing LNG exports from Sabine Pass, here via Breaking Energy.
One study, completed in January by the EIA, found the effect depended both on the amount exported and the speed with which exports picked up. All the exporters applying would have to build multi-billion-dollar liquefaction facilities at their export terminals, so no actual exports could occur for several years.