Republican leaders in the US Congress announced late Tuesday a measure allowing American oil exports for the first time in four decades.
Advertisement
USA oil and gas producers are hailing the lifting of a 40-year-old ban on American oil exports as a lifeline at a time when their sector is being decimated by sliding prices and oversupply.
“Our climate and communities can not afford the hazardous oil production that would come with lifting the crude oil export ban”, a conservation group that includes the Sierra Club wrote in a recent letter to Congress.
Oil prices are near an 11-year low, and the price difference between oil produced in the USA and the Middle East is so small, that US producers are unlikely to ship oil overseas, says Tom Kloza, chief global analyst at the Oil Price Information Service.
Most experts don’t believe overturning the export ban will significantly move oil prices, which remain at their lowest levels in years. Lower prices help in the fight against ISIS, for which oil is the primary income source.
Lawmakers this week realized the benefits lifting the ban would offer to the US economy and American consumers by acting to lift the out-dated ban on the export of crude oil through a provision in the end of year spending bill.
“There are concerns that we have about jobs, [that] jobs will leave the country because they’ve lifted the ban on crude oil”, House Minority Leader Nancy Pelosi (D-Calif.) told reporters.
Refiners have been the largest benefactor of the US shale oil boom as refineries capitalized off the so-called crack spread between cheap energy costs and more profitable refined gasoline and diesel – the U.S.is the world’s largest exporter of gasoline and diesel.
The Solar Energy Industries Association said the deal would spur $125 billion in new investment and triple USA solar power by 2022 to 95 gigawatts, or about 3.5 percent of US electricity generation.
Demand, not repealing the export ban, persists as the real driver of Southeast Texas refineries, Kloza said.
Just 17 months ago, with benchmark Brent and West Texas Intermediate oil prices hovering above $100 per barrel, the argument received far less focus comparatively outside of energy conferences and policy wonks. It would allow the president to impose restrictions on exports for national-security reasons and in case of a shortage. In response, USA companies are cutting costs and slashing spending on new drilling as they try to preserve cash flow and stay in business. The Republican from oil-producing North Dakota has pressured Congress to axe the trade restriction.
In exchange for lifting the export ban, Republicans agreed to extend tax credits for renewable energy, like wind and solar, and to remove riders from the bill related to various environmental regulations. If it passes both the House and the Senate, the measure to keep the government funded through September would be hard for President Barack Obama to veto.
“We have so much oil that when prices rise, production will grow and we’ll be able to export more of it”, Scott Sheffield, chief executive of Pioneer Natural Resources Co., said Friday in an interview.
Advertisement
The benefit of lifting the ban is likely to been seen in the long term, when the market recovers.
