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With fracking in full swing, is now the time for the US to start exporting crude oil?

Pump jacks are seen in the Midway Sunset oilfield, California, April 29, 2013. The nearby vast Monterey shale formation is estimated by the U.S. Energy Information Administration to hold 15 billion barrels of technically recoverable oil, or four times that of the Bakken formation centered on North Dakota. Most of that oil is not economically retrievable except by hydraulic fracturing, or fracking, a production-boosting technique in which large amounts of water, sand and chemicals are injected into shale formations to force hydrocarbon fuels to the surface. Picture taken April 29, 2013.
Reuters/Lucy Nicholson
Not a global product—yet.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published Last updated This article is more than 2 years old.

The US is the largest producer of oil in the world. But, with limited exceptions, it doesn’t export crude. That’s because of a law passed in 1975 to protect US domestic supplies in the wake of the first OPEC oil embargo. Of course, that was a long time ago. And as new drilling techniques have greatly increased US oil production, the companies that bring it up want to sell abroad, where a barrel can fetch as much as $105. (In the US, buyers pay $93 a barrel.) So is this a good idea or an awful one? Here are two ways to think about it:

Open the floodgates to exports: The basic argument here is that crude exports would be good for business and the economy. Right now, US energy infrastructure is inefficient. New fracking technologies have resulted in higher production of light, sweet crude. Unfortunately, US refineries are configured to deal with heavier types of oil and they can’t use as much of the lighter stuff. That’s created backlogs of freshly fracked oil, depressing its price. Lower oil prices might sound good to consumers, but the industry says that most of the benefit goes to the refiners, not people at the pump. From a public policy perspective, supporters of increased exports tout the benefit of an expanding oil industry (more jobs! more tax revenue!) and demonstrating US commitment to free trade.

This is a terrible idea: The basic argument here is environmental. Specifically, the fear that a higher price for fracked oil will lead to  more production—oil producers would have a lot less incentive to boost drilling amid a supply glut and soft prices. There are ongoing fears about the unintended consequences of pumping chemicals deep underground to shatter rock and the challenge of cleaning up pools of wastewater that accompany the process. And beyond that, environmentalists—such as Oil Change International—argue that expanding the stock of accessible oil, which exporting US crude would effectively do, is counter-productive at a time when the main task is figuring out how to use less oil, not sell more.

You’ll be hearing more of both of these arguments soon. The oil industry is preparing a lobbying push to reverse the export ban, and it may use international trade law to challenge the ban at the World Trade Organization.

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