In the past, only a trickle of U.S. crude flowed out of the country through these licenses. But that's changing. In July, producers exported 77,000 barrels per day of U.S. oil to Canada—the highest level in more than a decade, according to federal statistics. Royal Dutch Shell, BP, oil trader Vitol and three other companies have applied for or received the necessary government clearance to export domestic crude oil—mainly, if not exclusively, to Canada—according to recent news reports.
Now the industry has begun to tip-toe into the politically sensitive issue of removing the export barriers.
"The reason for the [oil] export controls—short supply in the U.S.—is becoming somewhat of an anachronism, as the situation now being faced is of abundant supply," Citigroup Inc. oil analysts wrote in a March report that suggested North America could become "the new Middle East."
"I'm not sure we should just automatically assume [exporting oil] would be bad," said Sieminski, a former Deutsch Bank economist. "It might actually be a way to grow the economy, create jobs and ultimately help reduce prices."
The industry is framing the notion of exporting domestic oil as a necessity created by a mismatch between the type of oil U.S. refineries are set up to refine and the type of crude oil flowing from North Dakota and South Texas. Because many Gulf Coast refiners upgraded their plants specifically to handle the cheaper heavy crude from Canada, the industry argues that light, sweet U.S. crude may need to be exported.
Conversely, if Gulf Coast refiners decide to buy more domestic crude from resurgent U.S. producers, then Canadian heavy oil delivered by the Keystone XL would be exported—a scenario some believe is more likely given the export restrictions on U.S. crude.
"There are likely to be economic incentives to export both Canadian and U.S.-based crude," the Citigroup report said. "Canadian crude should be the first to be exported from the U.S. to earn higher [profits] elsewhere."
Keystone XL: Needed for Energy Security?
Talk of oil exports and oil surpluses might come as a shock to Americans who still believe what they've been told for decades: that the nation is running out of oil and that we're importing too much oil from the politically volatile Middle East, which in turn makes the country more vulnerable to supply disruptions and price spikes.
In reality, however, oil prices are determined by the world market and problems or worries involving Middle East oil push up the cost of all crude, no matter where it comes from or where it goes. Physical supply disruptions—whether caused by international conflict, pipeline ruptures, or hurricanes—also trigger oil price spikes (as well as big increases in retail prices for gasoline and diesel).
What's more, the nation's dependence on foreign petroleum imports, now at 45 percent of consumption, has been declining since 2005, according to Energy Information Administration data compiled by the Congressional Research Service. Crude oil imports from the Persian Gulf, despite a recent uptick, are down 30 percent from the peak in 2001. Soaring U.S. production is expected to accelerate those trends.
Still, the Keystone XL pipeline continues to be portrayed as a matter of energy security, a persuasive argument that opinion polls show resonates with voters.
Presidential candidate Mitt Romney makes the energy security argument nearly every time he talks about energy. So do representatives with the oil industry. An executive with TransCanada Corp., the company behind the Canada-to-Texas pipeline, put it this way in a Congressional hearing in December: "Keystone will bring many benefits to the United States, but I believe the most important role that Keystone will play is to bring energy security to the United States during what has been recently some very unsettling times overseas."
That assertion has overshadowed concerns raised by environmentalists, landowners and others who oppose the project. Those worries range from water pollution problems and greenhouse gas emissions in the Canadian oil sands to the perpetuation of the nation's reliance on oil, the seizure of U.S. landowners' property by foreign companies, and the potential for spills and leaks in streams and rivers along the pipeline route.