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HOW THE LIFTING OF THE U.S. CRUDE OIL EXPORT BAN HAS CHANGED THE GLOBAL FLOW OF CRUDE OIL


Four years after the end of the U.S. crude oil export ban; boosted by the shale oil boom and OPEC’s restrictions, the flow of crude oil shipping across the Atlantic has now reversed.


October 6th, 1973. By hoping to win back territory lost to Israel during the third Arab-Israeli war in 1967, Egypt and Syria coordinated an attack against Israel on Yom Kippur - the holiest day in the Jewish calendar. Two weeks after the beginning of the war, the United States President Richard Nixon requested $2.2 billion from the United States Congress in emergency military aid for Israel. The Organization of Arab Oil Exporting Countries (OAPEC), less Iraq, responded by cutting crude oil production and decided to impose an embargo against the United States. The embargo was later extended to Netherlands, South Africa and Portugal.  was extended until March 1974. The embargo had a severe impact on price level with crude oil jumping from $3 a barrel in 1973 to $12 in 1974.


At that time, the United States was the world’s largest producer of crude oil with over 9 million barrels produced per day or 16% of the worldwide production. The country’s energy needs were mostly met by oil. Therefore, increasing demand required importing oil from other nations including the Organization of Petroleum Exporting Countries   demand. Long queues at petrol stations which were running out of gasoline became part of the American landscape.


WITHIN FOUR DECADES, THE U.S. HAD BUILT LARGE CRUDE OIL RESERVES […] THE COUNTRY WAS A LARGE NET IMPORTER OF CRUDE OIL DURING THAT PERIOD AS EXPORTATIONS WERE LIMITED.


 and fuel shortage, the U.S. government took a number of decisions including lowering the speed limit to 55 miles per hour to reduce consumption, odd-even fuel rationing where cars with odd number license plates could get gas only on odd-numbered days, shortened NASCAR races to conserve fuel as well as the institution of daylight savings time year-round for 1974-1975.


In order to reduce its reliance on imported crude oil from OPEC’s members and also to protect against another oil crisis, in 1975 the United States implemented a ban on crude oil exports as part of the Energy Policy and Conservation Act. Although it contained few exceptions, the policy helped to increase stocks and to keep oil underground rather than leaving the country. Between 1975 and 2008, crude oil inventories increased from 271 to 1,010 million barrels as a result of the implementation of the Strategic Petroleum Reserve (SPR) in 1977. The SPR is a United States Government complex of four sites based in Texas and Louisiana with deep underground salt caverns which have capacity for 727 million barrels.


Within 4 decades, the United States had built large crude oil reserves with the SPR reaching its full capacity in December 2009. The country was a large net importer of crude oil during that period as exportations were limited. Once crude oil was delivered to the United States, some vessels were forced to travel empty on their journey back across the Atlantic.


12 | ADMISI - The Ghost In The Machine | March/April 2019


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