Forty-two years ago, many Middle Eastern countries cut oil exports, leading to what’s now known as the 1973 Oil Crisis. The U.S. government’s response — a complete oil export ban — is now lifted, likely helping the Wyoming economy.
The recently repealed ban kept all oil drilled on American soil in the country.
Meant to ensure the country’s independence from worldwide oil trade if necessary, the ban has become unpopular in recent years, said Anne Alexander, former University of Wyoming economics and finance professor and current associate vice president of academic affairs.
“We just have so much oil sloshing around here doing nothing,” she said.
Specialized crude oil refineries play a key role in the success of exporting oil. American refineries are geared toward heavier oil imported from areas such as the Middle East.
Meanwhile, oil drilled in the U.S. is described as sweet and light. Other countries, such as in Europe, are better equipped to refine the lighter oil, Alexander explained.
“By the analysis we did, lifting (the ban) means we can ship oil out to people that can better refine it,” she said. “It’s brilliant.”
Lower retail gas prices could be the final result of the repealed ban, positive to nearly everybody in Wyoming and the country. However, direct effects on the state’s drilling might be less noticeable, said Chuck Mason, the H. A. “Dave” True, Jr. chair in petroleum and natural gas economics in the Department of Economics and Finance at UW.
“It has the prospect of having an effect, but it can’t be large,” he said. “There might be in the neighborhood of a $5 (per barrel) increase. It’s not going to foster a massive increase in drilling.”
Still, no large production increase is better than decreased production, leading to closed wells and eliminated jobs, Mason said.
“More likely, this will provide a little extra revenue to producers starting to reach a point of closing production or reaching bankruptcy,” he said.
Any larger economic effects, such as increased drilling, won’t take effect in the next year or two, Alexander said, but rather a decade.
“What the oil export ban lifting does is, it gives (energy companies) that more much reason to continue even in the face of low prices, because at least they’ll have a place to send the oil where it will be refined and priced competitively,” she said.
The lifted export ban in oil likely won’t change coal or natural gas prices, Mason said.
“In the U.S., we’ve evaporated the link between natural gas and crude,” he said. “And coal is on tough times because natural gas is so prolific.”
In the long run, exporting oil can lead to an increase in wells, allowing the U.S. to rapidly obtain local oil if needed in a time of crises, Mason said, while also leading to cheaper and more advanced drilling techniques.
“I think things that promote the development and deployment of fracking projects, however those ventures might be incented, makes us better generally at doing fracking jobs,” he said. “And I think that’s going to lower the cost of drilling across the board. Looking down the road, there could be this knockoff effect that could make it easier to extract natural gas.”