This section describes crude oil export restrictions, the SPR, and recent trends in U.S. crude oil production and the petroleum refining industry. The export of domestically produced crude oil has generally been restricted since the 1970s. In particular, the Energy Policy and Conservation Act of 1975 (EPCA) led the Department of Commerce’s Bureau of Industry and Security (BIS) to promulgate regulations which require crude oil exporters to obtain a license. These regulations provide that BIS will issue licenses for the following crude oil exports: exports from Alaska’s Cook Inlet, exports to Canada for consumption or use therein, exports in connection with refining or exchange of SPR crude oil, exports of certain California crude oil up to 25,000 barrels per day, exports consistent with certain international energy supply exports consistent with findings made by the President under certain exports of foreign origin crude oil that has not been commingled with crude oil of U.S. origin. Other than for these exceptions, BIS considers export license applications for exchanges involving crude oil on a case-by-case basis, and BIS can approve them if it determines that the proposed export is consistent with the national interest and purposes of EPCA. In addition to BIS’s export controls, other statutes control the export of domestically produced crude oil depending on where it was produced and how it is transported. In these cases, BIS can approve exports only if the President makes the necessary findings under applicable laws. Some of the authorized exceptions, outlined above, are the result of such Presidential findings. According to NERA, no other major oil producing country currently restricts crude oil exports. BIS approved about 30 to 40 licenses to export domestic crude oil per year from fiscal years 2008 through 2010. The number of BIS approved licenses increased to 103 in fiscal year 2013. Meanwhile, crude oil exports increased from less than 30 thousand barrels per day in 2008 to 396 thousand barrels per day in June 2014—the highest level of exports since 1957. Nearly all domestic crude oil exports have gone to Canada. To help protect the U.S. economy from damage caused by crude oil supply disruptions, Congress authorized the SPR in 1975. The SPR is owned by the federal government and operated by DOE. The SPR is authorized to hold up to 1 billion barrels of crude oil and has the capacity to store 727 million barrels of crude oil in salt caverns located at sites in Texas and Louisiana. According to DOE, the SPR held crude oil valuded at almost $73 billion dollars as of May, 2014. From fiscal year 2000 through 2013, the federal government spent about $0.5 billion to purchase crude oil, and spent $2.5 billion for operations and maintenance of the reserve. The United States is a member of the IEA and has agreed, along with 28 other member nations, to maintain reserves of crude oil or petroleum products equaling 90 days of net imports and to release these reserves and reduce demand during oil supply disruptions. The 90-day reserve requirement can be made up of government reserves, such as the SPR, and inventory reserves held by private industry. Under conditions prescribed by the Energy Policy and Conservation Act, as amended, the President and the Secretary of Energy have discretion to authorize the release of crude oil from the SPR to minimize significant supply disruptions. In the event of a crude oil supply disruption, the SPR can supply the market by selling stored crude oil or trading crude oil in exchange for an equal quantity of crude oil plus an additional amount as a premium to be returned to the SPR in the future. When crude oil is released from the SPR, it flows through commercial pipelines or on waterborne vessels to refineries, where it is converted into gasoline and other petroleum products, and then transported to distribution centers for sale to the public. Reversing a decades-long decline, U.S. crude oil production has increased in recent years. According to EIA data, U.S. production of crude oil reached its highest level in 1970 and generally declined through 2008, reaching a level of almost one-half of its peak. During this time, the United States increasingly relied on imported crude oil to meet growing domestic energy needs. However, recent improvements in technologies have allowed producers to extract crude oil from shale formations that were previously considered to be inaccessible because traditional techniques did not yield sufficient amounts for economically viable production. In particular, the application of horizontal drilling techniques and hydraulic fracturing—a process that injects a combination of water, sand, and chemical additives under high pressure to create and maintain fractures in underground rock formations that allow crude oil and natural gas to flow—have increased U.S. crude oil and natural gas production. Monthly domestic crude oil production has increased from an average of about 5 million barrels per day in 2008 to about 8.4 million barrels per day in April 2014, an increase of almost 68 percent. As we previously found, the growth in U.S. crude oil production has lowered the cost of some domestic crude oils. For example, prices for West Texas Intermediate (WTI) crude oil—a domestic crude oil used as a benchmark for pricing—was historically about the same price as Brent, an international benchmark crude oil from the North Sea between Great Britain and the European continent. However, from 2011 through June 13, 2014, the price of WTI averaged $14 per barrel lower than Brent (see fig. 1). In 2014, prices for these benchmark crude oils narrowed somewhat, and WTI averaged $101 through June 13, 2014, while Brent averaged $109. The development of U.S. crude oil production has created some challenges for crude oil transportation infrastructure because some production has been in areas with limited linkages to refining centers. According to EIA, these infrastructure constraints have contributed to discounted prices for some domestic crude oils. Much of the crude oil currently produced in the United States has characteristics that differ from historic domestic production. Crude oil is generally classified according to two parameters: density and sulfur content. Less dense crude oils are known as “light,” while denser crude oils are known as “heavy.” Crude oils with relatively low sulfur content are known as “sweet,” while crude oils with higher sulfur content are known as “sour.” As shown in figure 1, according to EIA, production of new domestic crude oil has tended to be light oils. Specifically, according to EIA estimates about all of the 1.8 million barrels per day growth in production between 2011 and 2013 consisted of lighter sweet crude oils. EIA also forecasts that lighter crude oils will make up a significant portion of production growth in 2014 and 2015—about 60 percent. Light crude oil differs from the crude oil that many U.S. refineries are designed to process. Refineries are configured to produce transportation fuels and other products (e.g., gasoline, diesel, jet fuel, and kerosene) from specific types of crude oil. Refineries use a distillation process that separates crude oil into different fractions, or interim products, based on their boiling points, which can then be further processed into final products. Many refineries in the United States are configured to refine heavier crude oils, and have therefore been able to take advantage of historically lower prices of heavier crude oils. For example, in 2013, the average density of crude oil used at domestic refineries was 30.8 while nearly all of the increase in production in recent years has been lighter crude oil with a density of 35 or above. According to EIA, additional production of light crude oil over the past several years has been absorbed into the market through several mechanisms, but the capacity of these mechanisms to absorb further increases in light crude oil production may be limited in the future as follows: Reduced imports of similar grade crude oils: According to EIA, additional production of light oil in the past several years has primarily been absorbed by reducing imports of similar grade crude oils. Light crude oil imports fell from 1.7 million barrels per day in 2011 to 1 million barrels per day in 2013. There may be dwindling amounts of light crude oil imports that can be reduced in the future, according to EIA. Increased crude oil exports: As discussed above, crude oil exports have increased recently, from less than 30 thousand barrels per day in 2008 to 396 thousand barrels per day in June 2014. Continued increases in crude oil exports will depend, in part, on the extent of any relaxation of current export restrictions, according to EIA. Increased use of light crude oils at domestic refineries: Domestic refineries have increased the average gravity of crude oils that they refine. The average API gravity of crude oil used in U.S. refineries increased from 30.2 degrees in 2008 to 30.8 degrees in 2013. Continued shifts to use additional lighter crude oils at domestic refineries can be enabled by investments to relieve constraints associated with refining lighter crude oils at refineries that were optimized to refine heavier crude oils. Increased use of domestic refineries: In recent years, domestic refineries have been run more intensively, allowing the use of more domestic crude oils. Utilization—a measure of how intensively refineries are used that is calculated by dividing total crude oil and other inputs used at refineries by the amount refineries can process under usual operating conditions—increased from 86 percent in 2011 to 88 percent in 2013. There may be limits to further increases in utilization of refineries that are already running at high rates. The studies we reviewed and stakeholders we interviewed generally suggest some domestic crude oil prices would increase if crude oil export restrictions were removed, while consumer fuel prices could decrease, although the extent of consumer fuel price changes are uncertain and may vary by region. Studies we reviewed and most of the stakeholders we interviewed suggest that some domestic crude oil prices would increase if crude oil export restrictions were removed.