Record-setting levels of U.S. oil production have sparked calls from industry officials and policymakers to reverse a 1970s ban on crude oil exports. Dissent, however, is emerging from inside the U.S. oil sector itself.
A January report from the American Petroleum Institute, an energy trade group counting more than 500 energy companies among its members, said exporting U.S. crude oil could add $70 billion to upstream investments by 2020 and lead to an increase of as much as 500,000 barrels per day in domestic production.
API Vice President for Economic Policy Kyle Isakower saidthat level of domestic crude oil production suggested restrictions on crude oil experts were “obsolete.” By placing U.S. oil on the world market, he said, American consumers could save as much as $6.6 billion in energy costs by 2020.
Under legislation enacted in response to the 1970s Arab oil embargo, the United States can sell petroleum products like gasoline and diesel, but not crude oil. Leo Gerard, president of the United Steelworks lobby, said reversing the ban would actually be bad business for the refiners that make those products, however.
“Lifting the ban would benefit oil companies that engage in oil exploration and production, but it would harm their refining operations that have to purchase crude at the market price,” he said.
Last month, energy mogul T. Boone Pickens stepped into the fray by expressing concerns about the wisdom of reversing the ban and now the industry itself is drawing battle lines over the debate.
For USW’s Gerard, crude oil exports would lead to higher prices for petroleum products like gasoline at home. West Texas Intermediate and Brent crude oil prices both fell Wednesday when the U.S. Energy Department announced the test sale of 5 million barrels from the Strategic Petroleum Reserve. Generally speaking, the more oil there is on the market, the lower the price. While that could give some indication of the market reaction to crude oil exports, refiners could lose out on cheaper oil from U.S. shale if it’s exported.
When the United States last released SPR in June 2011, in response to Libyan disruptions, retail gasolineprices fell more than 7 percent. Refinery groups lobbying against exports, however, say it’s premature to make bets on what happens in the future. With the International Energy Agency expecting Saudi Arabia and other Gulf states will return to the top of the oil heap in the next decade, refiners may have scored a point in favor of protectionism.
This piece is cross-posted from OilPrice.com with permission.