Collapsing crude prices have given oil producers a new argument for ending a 39-year-old US ban on exports.
With US output at a 31-year high and imports at the lowest level since 1995, producers seeking the best possible price for crude are straining at having to keep sales at home.
Removing the ban could erase an imbalance between US and foreign crude prices by expanding the market for shale oil.
A 38% decline in crude prices since June, “will weigh into the debate” and help make the case to lift the export ban, said Senator Lisa Murkowski, the Alaska Republican poised to take over as head of the Energy and Natural Resources Committee next year.
Lawmakers in Washington are set to hold a hearing next week on dropping the ban. Murkowski hasn’t decided yet whether she’ll introduce a bill to allow exports. Republicans, who are slated to take control of both houses of Congress next year, have yet to reach consensus on what to do.
The top House and Senate Republicans haven’t yet taken a position on the matter and some rank-and-file members, including Senator Susan Collins of Maine, say they are wary of action because of fears it may lead to higher gasoline and heating-oil prices.
President Barack Obama’s former top economic adviser Lawrence Summers called for ending the ban in September after the Brookings Institution, a Washington policy group, released an analysis showing that exports would lower gasoline prices.
White House Press Secretary Josh Earnest declined to say yesterday whether lifting the ban was being discussed or considered by the administration.
The drop in prices exacerbates the pain of the export limit, said Erik Milito, upstream policy director for the American Petroleum Institute, a lobbying group that represents producers including Exxon Mobil Corp.
“This is a global competition for market share,” Milito said. “These other regions around the world want to raise the competitive pressure on U.S. energy and we’re asking our policymakers to at least put the US on a level playing field.”
Since many US refineries use heavier crude, instead of the light sweet variety that comes from shale formations, opening up the export market would give producers more customers. Refiners who benefit from the declining cost of crude they process have fought the idea of exports.
“We support the current system regardless of the price and we are building more capacity to process domestic crude,” said Bill Day, a spokesman for Valero Energy Corp.
A decision by the Organization of Petroleum Exporting Countries last week to keep oil output unchanged has been viewed in the US as an effort to depress prices and slow production growth from shale plays. West Texas Intermediate oil prices fell 10 percent the day after the OPEC decision was announced.
Led by declining crude, gasoline prices fell below $2 a gallon at a station in Oklahoma City this week.
The Government Accountability Office, Congress’s investigative arm, in an October report concluded that exports may lower pump prices by as much as 13 cents a gallon, even as they raise US oil prices.
That would happen because gasoline is pegged to Brent, a global benchmark price, rather than West Texas Intermediate, GAO said.
Many in Congress are awaiting an analysis from the Energy Information Administration, which collects and analyzes energy data, on the tie between US gasoline prices and global oil markets.
“Should we let our foreign policy be driven by our need for foreign oil like we have for the past 40 years? I think not,” Tom O’Malley, chairman of refiner PBF Energy Inc said in Houston last month.
Limited crude exports, which include shipments to Canada, have surged to a near-record. The US Commerce Department in June expanded its definition of what kind of oil products can qualify for foreign sale, allowing companies to send it out after minimal processing.
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