Guarantees needed to lift oil export ban
In Our Opinion
If there could be guarantees that lifting the almost 40-year-old ban on exporting U.S. crude oil would drastically reduce gasoline prices we’d say doing so should be a no brainer. Lift the ban.
Unfortunately there are many factors that determine the price of gasoline at the pump besides supply, including predictions of possible weather conditions that could impact production, political turmoil and speculators making guesses. All of this means that while the price of oil per barrel might drop the price of gas we put in our cars could rise.
Some members of Congress are making a strong push to lift the ban, enacted in the 1970s in response to the Arab oil embargo. The most vocal recently was Alaska Sen. Lisa Murkowski, top Republican on the Senate Energy Committee, who told the audience in an address at the Brookings Institute lifting the ban would boost American oil production while putting “downward” pressure on global oil prices, all factors that would benefit U.S. consumers.
And President Barack Obama’s Energy Secretary Ernest Moniz joined the lift chorus by saying it might be time to reconsider the ban, given U.S. production levels.
Others don’t agree. The ban was enacted to prevent gasoline shortages and price spikes and individuals like New Jersey Democratic Sen. Robert Menendez say it’s still needed. Without it, energy prices could increase because the difference between global oil prices and U.S. oil prices, about $10 a barrel less for U.S., could be eliminated.
Murkowski said the reason the ban needs lifting is because of the oil production boom in North Dakota and Texas, creating a glut of U.S. light, sweet crude oil. Because Gulf Coast refineries are geared towards refining heavier grades of oil, the glut could dampen U.S. oil production, impacting prices and jobs unless it’s sold to foreign markets.
Light, sweet crude has a lower density, viscosity and center of gravity, flows more freely at room temperatures with a lower wax content than heavier crude, making it more desirable because it produces a higher percentage of gasoline and diesel fuel once refined. It also has fewer negative impacts on the environment because it doesn’t require the use of more advanced refining techniques and contaminants as heavy crude does.
Because of this, according to IndexMundi.com, light sweet crude can command a higher price on commodities markets, which makes it easy to see why U.S. oil companies would want to lift the export ban. Since it’s easier to refine, one idea to help American consumers might be to have Gulf Coast refineries retool to handle the lighter grade. According to the U.S. Energy Information Administration, the U.S. produced about 7.03 million barrels of crude oil per day in December 2012 while importing about 7.58 million barrels per day.
While the EIA couldn’t determine exactly how much U.S. oil is consumed in this country, it did say “the majority of the crude oil produced in the U.S. is refined in U.S. refineries.” Because refining our light crude is easier than the imported heavy crude we would think that would lead to lower refining costs, and perhaps lower costs at the pump if Gulf Coast refineries retooled.
Then there are transportation issues. Ensuring less costly and safer ways of getting the oil to the refineries could help.
One way is to bring refineries closer to the source, which will happen in one instance when construction of the 20,000 barrel per day Dakota Prairie facility in Dickinson, N.D. is finished sometime later this year. And it might also be time to once again revisit construction of the Keystone Pipeline.
All this means that energy pricing is a complex business that simple supply and demand can’t easily account for. Oil companies have been seeing record profits, and while we’re sure they’d like to see more, it’s time they thought more about their customers’ wallets than their stockholders’ portfolios.
If exporting light, sweet U.S. crude gets us closer to $2 a gallon at the pump, then lift the ban. Otherwise, keep our oil at home, and keep us less dependent on the energy resources of others.