WASHINGTON (ICIS)--US oil producers on Tuesday welcomed word that President Barack Obama's administration is considering ending the 40-year-old ban on exporting US crude oil, but refiners cautioned that hasty action could harm the nation’s energy profile and economy.
Oil producers and refiners both welcomed remarks made earlier on Tuesday by Energy Department secretary Ernest Moniz to the effect that the Obama administration is considering the possibility of easing statutory limits on the export of US-produced crude oil that date from the early 1970s and the Arab oil embargo.
But refiners warned that simply lifting the export ban alone without considering multiple other federal energy policies would be unwise.
Speaking at a multinational energy conference in Seoul, South Korea, earlier on Tuesday, Moniz was quoted as saying that easing the export ban should be considered because newly abundant domestic crude production from shale deposits is the light, sweet oil variety that many US refineries built to handle heavy crude cannot process.
“The issue of crude oil exports is under consideration,” Moniz was quoted as saying by the Wall Street Journal.
“A drive for this consideration is that the nature of the oil we’re producing may not be well matched to our current refinery capacity,” he told the Journal.
Muniz also said that a multi-agency study of the issue was underway within the Obama administration.
However, a Department of Energy (DOE) spokeswoman later said that there is no formal “study” underway and that Moniz simply meant that the administration is looking into the matter.
American Petroleum Institute (API) spokesman Zachary Cikanek said that the oil producers trade group “supports lifting trade restrictions” on oil exports, and he cited an API study indicating that an end to the export ban would lower costs to consumers for gasoline, heating oil and diesel fuel and could generate as many as 300,000 new jobs.
The API also said that renewed US oil exports could add some $27bn annually to the US economy and boost federal, state and local government tax revenues by as much as $13.5bn in 2020.
The DOE says that by that year, the US is projected to become the world’s largest crude oil producer.
Charles Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), said that “We have always espoused free and open markets, and indeed if lifting the oil export ban is another step toward free and open markets, we would not oppose it”.
However, Drevna said, “There are too many moving parts around US energy production and refining for ending the export ban to be looked at in a vacuum”.
Drevna said that Moniz’s comments in Seoul were nothing new.
“I don’t think anyone should read too much into what the secretary said today,” he said. Moniz merely said, Drevna said, “that the administration is continuing to assess the possibility” of lifting the export ban.
“'Assess' is the right term,” Drevna said, noting that recent oil production and refining changes in the US “have no historic precedent” with the large volume of light, sweet crude coming available along with the flow of heavy Canadian oil sands production.
In addition, he said, “It is an overstatement to say that US refiners can’t handle light crude, when in fact some refiners are making investments to do just that in the near term”.
Drevna argued that in giving consideration to lifting the crude export ban within the context of free markets, “let’s look at free markets in a holistic approach”.
Just as the 1970s-era export ban - designed to keep US crude at home in the wake of the 1973 Arab embargo - has been overtaken by newly abundant domestic US oil output, said Drevna, other aspects of US energy and trade policies have become antiquated.
“We shouldn’t be living in the shadow the 1970s and the era of energy scarcity,” he said, “and neither should we be living in the shadow of the 1920s and the Jones Act or 2007 and the Renewable Fuel Standard.”
The Jones Act bars the movement of any sea-going cargoes between two US ports on any vessel other than US-flag ships constructed in the US, owned by US citizens and crewed by US citizens.
That statute has long been criticised for impeding trade between US ports and raising freight rates, but it is staunchly defended by US shipbuilders and mariners.
The 2007 Renewable Fuel Standard (RFS) requires that US refiners blend a certain percentage of biofuels into the nation’s gasoline supply and was passed by Congress to help reduce US dependence on foreign oil imports.
Drevna said that that policy too has been overtaken and mooted by the new renaissance in domestic oil and natural gas production.
He said that “this is the right time to begin the debate” about the crude oil export ban.
“But let’s make sure that all the parameters of the discussion are included and that the ban is not looked at in a vacuum,” Drevna said.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy