AFPM will not oppose US crude exports − Drevna

08 January 2014 23:33 Source:ICIS News

By Al Greenwood

HOUSTON (ICIS)--The American Fuel & Petrochemical Manufacturers (AFPM) will not oppose the loosening of restrictions to US crude oil exports, but the group's president urged on Wednesday that policy makers should adopt other measures that would promote free-market principles.

The restrictions on exports were put in place more than 30 years ago in response to the oil crisis of the 1970s. Under the Export Administration Act of 1979, the US can only export crude oil to neighbours Canada and Mexico.

Some are now questioning the need for such restrictions because US oil production has risen sharply, due to new techniques such as hydraulic fracturing and horizontal drilling.

Senator Lisa Murkowski (Republican-Alaska), a member of the Senate Energy and Natural Resources Committee, has called for the removal on the export restrictions.

At least one refiner, though, wants the US to maintain the current export system.

Charles Drevna, AFPM's president, granted that some individual refiners may not support the removal of the restrictions.

However, "As an association representing the entire industry both from the refining and petrochemical sides, we are not going to oppose the removal of the limitation on the export of crude oil," he said.

"We consistently and fervently have been champions of free markets," he said. Implicit in that principle is support for the global free trade of commodities.

"I understand the reasoning behind the calls for the elimination of the ban," he said. "The energy portfolio of 2014 is significantly different than the energy portfolio of the '70s, '80s or even the '90s, for that matter, or the 2000s."

However, if policy makers are considering opening up crude exports, then they should consider other regulations that go against the principles of a free market, Drevna said.

"While we shouldn't be living in the shadows of the '70s, we should also not be living in the shadows of 1920, when the Jones Act was enacted, and that is an inhibitor of free trade internally," Drevna said.

The Jones Act requires that all shipments by water between US ports be carried by US-flag, US-built and US-crewed vessels.

The restriction is a significant bottleneck. The US lacks the Jones-Act tankers that could take light crude from the US Gulf Coast to the northeast, where the refineries are designed to handle light crude.

Although much of the US refining capacity is along the Gulf Coast, these refineries are designed to handle heavy grades of crude.

The investment bank Barclays estimates that the US has enough Jones-Act tankers to carry at most 140,000 bbl/day of light crude until the fleet is expanded in 2015 and beyond.

Another policy that deserves a second look is the Renewable Fuels Standard (RFS), which requires that the US blend mandated volumes of renewable fuel, Drevna said.

"The proponents of that standard indicated and publically stated that the goal behind the RFS of 2007 was to lessen our reliance on foreign oil," Drevna said.

"If we're about to lift the ban on crude, then we should eliminate the Renewable Fuels Standard because, by definition, it is not needed," he said.

He also called for the US to open federal land to energy development.

Also, the pipeline infrastructure of the US has lagged behind the country's energy development, Drevna said. Pipeline development should be encouraged, although this should not be done through mandates or subsidies.

"All of these things need to be done in a holistic fashion to make the system work best for the global economy and for the American consumer," Drevna said.

By Al Greenwood