As the debate over repealing the US ban on crude oil exports intensifies, it is worth remembering the United States was a major petroleum producer and exporter for much of the modern era .
Until around 1950, the United States accounted for more than half of world oil production and was a major exporter. But the trade balance in crude and refined fuels began to deteriorate in the late 1940s and 1950s and turned negative from 1953 onwards.
The problem was not a shortage of oil in the United States (domestic crude production peaked in 1970) but growing competition from the enormous fields being opened up across the Middle East in Iran, Iraq, Saudi Arabia, Kuwait, the Emirates and Libya. Middle East production was simply cheaper and the oil majors developed it in preference to US fields.
Huge amounts of US production capacity were shut-in across Texas and the other southwestern states to support prices while the small petroleum producers lobbied for voluntary and then mandatory controls on imports to protect their remaining market share.
The long period of low and falling real oil prices during the 1950s and 1960s linked to the opening of the giant Middle East and Soviet fields stimulated a massive increase in demand while curbing investment in capacity in the United States to replace depleting fields. By 1972 the last remaining spare capacity in Texas had disappeared, handing pricing power to OPEC, though the shift did not become apparent for another 18 months, when the Arab countries cut production and embargoed the United States in protest at its support for Israel in the 1973 war.
The impact on the US trade balance from a combination of stagnating domestic production, rising imports and sharply higher prices was devastating. The US deficit in crude and refined fuels soared from just $2.3 billion in 1970 and $7 billion in 1973 to $24 billion by 1975 and $75 billion in 1980. The trade gap narrowed to just $30 billion in 1986 following the collapse of oil prices and an increase in US crude output before beginning to deteriorate again more or less continuously until 2005.
Since 2005, the combination of reduced petroleum demand and the shale revolution has cut net imports of crude and fuels from 12.5 million barrels per day to just 5 million b/d in 2014.
In the 1950s and 1960s, it was the oil exporting countries which squeezed producers in Texas and the other states of the US. Now US producers are having the same impact in reverse thanks to the shale revolution.
From this brief history, it should be clear that the big shifts in oil prices and the direction of trade have been driven by discoveries (Pennsylvania in the 1860s, the southwestern United States from 1900 through the 1930s, California from the 1920s, Iran from 1908 and then the Arab countries from the 1930s through the 1950s) and improvements in technology (which make previously unrecoverable resources profitable for the first time).
There has never been a shortage of oil in the United States or globally at any point in the last 150 years -- it’s just a question of price, investment and technology. The history of the last 70 years has been shaped by shifts in market share between the US and Middle East producers. The shale boom is just the latest manifestation.