ESG & Industry Updates

BREAKING: House Passes Bill to Lift Crude Oil Export Ban

Posted by Ed Burke on Oct 9, 2015 2:23:45 PM

Picture of the United States House of Representatives

This afternoon the US House of Representatives voted 261-159 to lift the Crude Oil Export Ban that has been in place for over 40 years. 

With the ban in place, prices have been artificially depressed at the refinery level due to limited capacity in the face of massive new production, so the thought is lifting the ban will allow producers to get more return on oil produced domestically. Refiners are obviously less than thrilled for the most part, for the same reason. 

Additionally, the ability to export is seen as being a potential positive for geopolitics and trade relations with other nations. 

On the other side though, environmental groups and the Obama administration argue that lifting the ban encourages further expansion of fossil fuel production, and disincentivizes and slows down the movement to non carbon intensive alternatives. 

(For a quick recap of some of the pros and cons, you can skim this article from 2013, when rumblings about overturning the ban began in Congress: Is It Time to Overturn the Crude Export Ban? )

Anyway, the House is the first hurdle in what could be a winding legislative process. Mitch McConnell has historically been hesitant to introduce bills of this nature to the floor, which could be an issue. Additionally, many Senate Democrats are not inclined to vote for the bill out of fear of backlash if domestic gas prices rise for their constituents (even though a recent EIA report indicated there should be no negative impact on consumers). One ammendment added may help entice Democrats though, and thats a provision that will allow higher payments to shipping unions involved, which is a key constituent for those in relevant states. 

To top it off, the White House has already announced that the President will veto the legislation, should it hit his desk. Even if the bill gets through the Senate, then, its unlikely to garner nearly enough votes to override a veto. 

Long story short, we will probably be in limbo on what actually happens with the legislation for at least another week or two, and its possible it dies in the same fashion as the Keystone Bill earlier this year. Don't expect that the market wont jump around one way or the other on the news though  - even though we really dont know whats happening yet (when has that ever stopped anything?)

Read More

Topics: US Crude Exports, CRUDE, export ban

Would CRUDE Exporting Increase Your Pain at the Pump? Not Necessarily

Posted by Ed Burke on Jan 7, 2014 1:43:00 PM

As we’ve discussed, proponents of overturning the ban on US Crude Exports cite the economic gain to be had, including jobs to be created.

An objection to lifting the ban on US Crude exporting is that given that US consumers are paying record prices for at-the-pump gasoline, it’s tough to see exporting the raw material to produce that gasoline. 

Gasoline prices, however are determined by global markets not domestic supply per se, although there is an influence. 

What's important to remember concerning the Crude Export ban is really two key factors:

It is permissible under US Law to export refined oils - ie finished products. If the argument for maintaining the ban is that it will negatively impact domestic gas supply, thats not really true as one could, today, export finished gasoline. In fact, the US is one of the world's largest exporters of finished (refined) diesel & gasoline. 

Secondly, and more importantly perhaps - the US refinery infrastructure has understandably not been able to keep up with the boom in production of crude, in both refinery capacity and transportation ability. This is resulting in downward pressure on the prices producers can get from refineries for their Crude, making it less profitable. Continued downward pressure could remove the incentive to produce in the first place.

What does that mean for pump prices? It means the incentive to produce and sell domestic crude to be refined into gasoline is not really there. Which, in turn, means the banning of exporting crude is not some automatic way to increase the domestic supply of refined gasoline. Without a large increase in supply, you dont get a decrease in price. 

So what about pricing if the ban is lifted? 

Again, gas prices are largely globally influenced, however exporting to nations that have refinery capacity will drive up the total supply and potentially lower prices.

Outside of this, the economic benefits to the US are estimated to be in the billions - and with an improving economy, if gasoline prices remain stagnant they become a lower percentage of expense for individuals which essentially has the same impact as a price drop in a stagnant economy. 


Read More

Topics: Energy Independence, Fracking, CRUDE

Is it Time to Overturn the US Crude Export Ban?

Posted by Ed Burke on Nov 8, 2013 3:33:00 PM

Congress is reportedly considering overturning laws banning US Oil Producers from exporting Crude. The law originally went into place in the 1970’s largely in reaction to embargoes that raised “scarcity” concerns – essentially, blocking export is supposed to safeguard from scarcity in domestic supply.  This is timely on their part – as we have seen for the first time since 1995, US Crude production has exceeded imports. What do they have to do with each other? In the absence of an export potential, or at least one not slowed and more expensive due to refining, US crude production will hit a plateau or worse. But why?

Refined oil  (gasoline and diesel) can be exported under current US law, and exports have grown substantially in recent years. The issue is, however, that the shale oil boom is producing huge volumes of light crude. In order to export, these huge amounts of crude need to be refined, which is difficult, costly and will ultimately slow production over time. The Council on Foreign Relations sums the issue up nicely in the following quote:

“Restrictions on crude oil exports are already beginning to undermine the efficiency of US oil economy. Much of the country’s rapidly growing production of light crude oil… comes from either areas where refiners are not interested in or able to process it, given that many US refineries are configured to run on lower-quality crude oil, or in parts of the country with inadequate transportation infrastructure. With few viable domestic buyers, producers are forced to choose between leaving oil in the ground and pumping it at depressed prices. The artificially low prices slow additional US Crude production. New refineries currently under construction will help remedy some of these market distortions over time, but a simpler, more cost effective solution would include allowing US Crude to be exported

(CFR Policy Innovation Memorandum No. 34 – you can read the whole thing by clicking here )

The CFR also estimates that Crude Oil exports could generate upward of $15 billion in annual revenue by 2017. Revenue to be made from export should also serve to stimulate continued investment in infrastructure, move technology forward, increase profitability for domestically based producers, not to mention create thousands of permanent, high paying jobs for Americans. 

Before we assume it’s a cut and dry decision however, there are several compelling arguments against dropping restrictions on Crude export, from economic concerns to environmental ones. Since this is a big and somewhat complex topic however, I will address them in subsequent posts.

What are your intial thoughts on US crude export policy? Do you favor a change?

Read More

Topics: Energy Independence, US Crude Exports, US Energy Boom, CRUDE

Recent Posts

Posts by Topic

see all