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What They’re Saying: U.S. Oil Export Ban Causing “A Market Inefficiency”

As lawmakers examine the future of energy policy in the United States, there is a mounting consensus – backed up by a growing body of research – that the current policy of restricting the export of crude from the U.S. no longer reflects the reality of today’s energy landscape.

This was one of the key messages delivered by a number of witnesses before the U.S. House Energy and Power Subcommittee this week and echoed by industry leaders, analysts and public policy experts over the past few days.

Here’s what experts are saying:

  • ConocoPhillips CEO sets optimistic tone on ending longtime ban. “Selling “surplus” U.S. oil abroad would have broad domestic benefits, and refiners need not worry about securing adequate crude supplies if the domestic export ban were lifted, according to Ryan Lance, CEO of ConocoPhillips. In a speech yesterday at the U.S. Chamber of Commerce, Lance said talks with congressional and administration stakeholders indicate broad consensus that exporting oil is the right policy move, but “building that bipartisan support is tough, just like it is with a lot of issues our country is dealing with.” “The conversation that we’re having across all of Congress and even the administration believes this is the right policy to be enacting,” Lance said, adding that conversations are focusing on “trying to understand the pace at which it needs to go forward, [and] should it be phased in its approach.” (E&E News, 3/4/15)
  • Pioneer CEO Scott Sheffield calls for end to oil export prohibition in new age of energy abundance. “As the number of U.S. drilling rigs plummets by a third and thousands in the industry face layoffs, oil companies are focusing on an effort to convince Congress to lift the longstanding ban on oil exports. Scott Sheffield, CEO of Pioneer Natural Resources, also based in Texas, was making the same push Tuesday in front of the House Subcommittee on Energy and Power, arguing the industry’s struggles with low oil prices are worsened because companies aren’t allowed to ship American crude oil to foreign nations. “If current trends continue and the export ban is not lifted, U.S. shale oil production will flatten or decline by disproportionate volumes versus our overseas competitors, diminishing the profound benefits of the shale revolution.” (McClatchy News,3/3/15)
  • Removing crude oil export restrictions will level the playing field for U.S. producers. “More than ever before, U.S. shale producers are becoming the victims of outdated restrictions on the export of crude oil from the United States. Export controls have ensured the most oversupplied part of the global oil market is at home in the United States. Removing the antiquated export ban is the only way to enable U.S. shale producers to compete fairly in the global oil market, protect jobs and promote energy security.” (Reuters, 3/2/15)
  • Crude export ban is causing “a market inefficiency,” says Amy Jaffe. “We’re really arguing about who gets the margin,” said Amy Myers Jaffe, an energy expert with the University of California, Davis. “I’m not sure why we’re picking one product over another.” Jaffe added that the crude export ban is driving an accumulation of surplus oil inside the United States, depressing domestic prices relative to global markets. “We have this giant stockpile of oil that’s sitting with no place to go,” she said. “That is a market inefficiency.” (Houston Chronicle, 3/3/15)
  • The U.S. is a global leader in refined petroleum product exports; crude oil export ban “is out of date.” “Ironically, the U.S. is the world’s third-largest exporter by volume of oil products. But the crude oil from which they are made cannot be exported. The Brookings Institution projects that oil production will rise by nearly 3 billion barrels per day. But if production continues to skyrocket, Mr. Lance said, the country will have no place to put all of that oil […] “The fact of the matter is we are running out of storage capacity in the U.S.,” Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York.” (Washington Times, 3/3/15)
  • President of McGraw Hill Financial Global Institute notes crude export ban does not benefit consumers. “John Kingston, president of McGraw Hill Financial Global Institute, which publishes pricing benchmarks and industry-focused reporting and analysis, said there was “no evidence at all” that domestic crude and gasoline prices are linked. If there was, Kingston said, U.S. consumers would have seen gasoline prices drop when the domestic West Texas Intermediate benchmark fell below its international counterpart, Brent, several years ago as U.S. production increased and growing stockpiles became “stranded” at the storage hub in Cushing, Okla. “If the case was to be made, that keeping a large supply of crude here in the U.S. lowers prices, it would have happened,” Kingston said. “It’s not just theoretical; we had the experiment. Nobody set out to have the experiment, but we had it. And there was no evidence at all that that kept the price of gasoline in check.” (E&E News, 3/4/15)
  • U.S. gasoline prices are “set on the international market,” says AFL-CIO. “To me, the gas price argument is settled,” said Brad Markell, executive director of the AFL-CIO’s Industrial Union Council. “U.S. gas prices are set on the international market, and whether we export crude or don’t export crude, that’s going to be the truth in the future, as well.” (E&E News, 3/4/15)
  • Interconnectedness of global and U.S. oil markets critical going forward, says EIA Administrator. “Decisions made by producers affecting both production levels and the development of their resources have a direct effect on oil prices that in turn affect producers and consumers everywhere, including the United States […] The United States, already the world’s largest exporter of petroleum products, has a keen interest [in] how overseas demand for various petroleum products will evolve. More broadly, future trends in global oil demand largely hinge on the rate of consumption growth in the Middle East and non-OECD Asia, including but not limited to China and India. Demand as well as supply will be a key influence on future oil prices, with outcomes having direct implications for both U.S. producers and consumers.” (Congressional testimony, 3/3/15)

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