The country is so flush with crude that imports are plunging and drillers are challenging export limits imposed after the 1973 Arab oil embargo. Murkowski, the top Republican on the Senate Energy Committee, called on Obama yesterday to end restrictions and vowed to introduce legislation if he doesn’t.
Easing controls would have been unthinkable just three years ago, when uprisings in Arab countries such as Libya pushed crude prices over $100, said Philip Verleger, a former director of the office of energy policy at the Treasury Department and founder of the Aspen, Colorado-based consultant PKVerleger LLC.
The boom has been led by drilling in the Permian Basin in West Texas and the oil-rich Bakken shale, which stretches from North Dakota into Montana and Canada.
North Dakota and Texas have more than doubled crude output since Obama’s 2011 speech, with Texas pumping more than Iran, according to the EIA, the statistical arm of the U.S. Energy Department, and a Bloomberg survey of producers, oil companies and analysts.
Drilling is spreading in emerging oil fields in the Rocky Mountain region such as the Niobrara in Colorado and the Bone Springs in New Mexico and spurring a revival of crude extraction around Wyoming’s Teapot Dome formation, home of the first U.S. reserves and the namesake of a 20th century political scandal. Colorado’s production jumped 17% in the first 10 months of 2013, Wyoming rose 16% and New Mexico added 10%, according to the EIA.
A record amount of crude is already riding the rails from oil fields in North Dakota, Colorado and New Mexico to California’s fuel makers, according to the California Energy Commission. Companies looking to ship even more include Tesoro Corp., Valero Energy Corp. and Plains All American Pipeline LP, which are planning to build train terminals in California and Washington state, according to company statements and regulatory filings. Plans are awaiting permits or in the planning stages to handle capacity roughly equal to the amount of crude sent to the region by Saudi Arabia.
If the railway networks on the U.S. West Coast are completed, the region’s refiners will be able to use domestic crude supplies to boost exports to meet rising needs in Asia, where demand for new cars, electricity and air conditioning is boosting energy consumption. China, already the world’s largest importer, will rely increasingly on crude from the Middle East and refined fuels from the U.S. to meet its consumers’ growing demand.
An increase in the number of U.S. cargoes to Asia might force Saudi Arabia to cut its output to head off a worldwide glut, Verleger said. As the de facto leader of the Organization of Petroleum Exporting Countries, the kingdom is monitoring signs of potential oversupply as Iraq and Libya try to boost output and Iran increases exports as international sanctions are loosened, he said.
“It’s another outlet for North American oil products and means more supply for the rest of the world,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consultant in Houston. “The West Coast is behind the rest of America as far as getting crude by rail. It will increase supply and help the consumer.”