Ending ban on oil exports would mean cheaper gasoline, energy executive says

(Jeff Pachoud/AFP/Getty)

Should the government end its 40-year-old ban on exporting crude oil, the nation would enjoy benefits ranging from jobs to a decline in gasoline prices, an oil industry economist said in a talk this week in San Antonio.

ConocoPhillips senior economist Helen Currie, citing a study by the energy consulting firm IHS Inc., said prices at the pump would fall by about 8 cents a gallon should crude exports be allowed.

Lifting the ban would allow the world’s refineries “to be able to make more gasoline and diesel because it would allow more efficient allocation of crude oil around the world,” she said.

In addition, “we’d get a lot more jobs if we allow crude exports — roughly an additional 1 million jobs” for the years 2016 to 2030, according to the IHS study, Currie said.

U.S. geopolitical standing also would improve, she said, “and it would probably smooth out some volatility we see in crude prices.”

At Houston-based ConocoPhillips, Currie oversees long-range planning, investment analysis and strategic initiatives. She spoke Thursday night at the World Affairs Council of San Antonio.

The nation is producing more crude oil because of the “shale revolution” that began with drilling in North Texas’ Barnett Shale.

“Once they figured out a secret recipe of combining the hydraulic fracturing and horizontal drilling,” she said, “that just unlocked a tremendous amount of resource addition to the country.”

The nation’s most important shale plays are the Eagle Ford, West Texas’ Permian Basin, and the Bakken in North Dakota. ConocoPhillips is active in all three.

The nation’s oil production bottomed out in about 2008. “Then the Bakken really starting coming online, and the Eagle Ford came on like gangbusters right behind that. So production has increased very rapidly in just a few years.”

Looking ahead, U.S. oil production is predicted to peak at about 12 million barrels a day “a few years out,” she said. “For years, we thought our peak was about 11 (million barrels a day), and we fell down to 7.5 (million barrels a day). Now we’re talking about producing 10 or 12 in just a few years — and maybe more.

“That’s a big deal,” Currie said, because it has helped the United States return to being a major oil superpower.

Even so, the nation will continue import oil from a number of countries, including the Middle East. “That’s just the nature of how the markets work,” she said.

Yet the United States probably won’t import much light crude oil from the Middle East because of production from the Eagle Ford and other shale plays.

Mexico presents another opportunity for shale development as it opens development to foreign investment.

ConocoPhillips “is excited” to see what Mexico’s final rules will be and how the company can do business in Mexico, she said.

Shale production also has contributed to rising amounts of natural gas, which is increasingly used to fuel power plants.

“More gas used in power generation creates far fewer greenhouse gas emissions than does coal,” Currie said.

In addition, rising natural gas production from shale plays has kept prices relatively low. The lower price is aiding manufacturing, she said.

Likewise, chemical feed stocks from natural gas liquids are in abundant supply, particularly along the Gulf Coast. That, too, is attracting investment and helping manufacturing return to this country, she said.

The U.S. is expected to become a net exporter of natural gas, with many liquefied natural gas export plants being proposed.

“We don’t think most of those will be built,” Currie said, because of the expense of construction and permitting. “They are multi-billion facilities.”

Although one LNG plant is being built by Cheniere Energy in Louisiana, “all of the others are still getting talked about,” Currie said. “I’d wager that not many of them will happen.”

If we have enough petroleum products that we could export, why do we need the pipeline?
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You mean the pipeline from Canada? I’m not sure.

It may be that all of the fracked oil in the USA is light sweet crude but the refineries in louisiana and texas are set up to refine thick sour crude.

The canadian oil is thick sour crude.

So US refiners might prefer the canadian crude. that way when export bans are lifted the US refiners will still have access to cheaper thick sour crude from canada while the more expensive light sweet crude is exported.

A lot of the new oil coming onstream after 2016 will be coming from west texas. that oil would not use any pipe from canada—nor does eagle ford.

All this is just my WAG.

“I think there should be a price trigger. For example exports could be allowed once wti oil hits a certain price. Maybe 75.00 per barrel. If you give the energy companies a target to hit before allowing exports then they will have an incentive to meet that price so they can begin selling abroad at a higher price.”

Obama has more than tripled our money supply. We have no idea how much more money he’ll wish into being. Therefore putting a set price into law, chipping it in stone, as it were, will never work. One hundred 1973 dollars is probably close to $1,000 present day dollars. (Don’t think so? What did you pay for a car in 1973 versus what you’d pay for a similar car today? You can argue it’s a better car, but the amount of better, like software, costs nothing. So, how about what you spent on food in ‘73 versus now?)

Then there’s the problem of game theory. The guy who moves first (in this case, say, Acme Oil) is the loser. Acme dumps oil at a low price to get the ball rolling. (Your incentive scheme.) But it loses because the other players move in as soon as the price goes down. Acme is out their investment and is now competing head-to-head in a market they created. In the American system any CEO who does not optimize this quarter’s earnings is out at the next board meeting.

No, markets are too complex to regulate. If Reagan hadn’t deregulated the phone company do you think you’d have a cell phone today? No. They’d still be the size of a brick and cost $1k.

Free markets are the only efficient market. Anything you do based on the static situation today (like not allowing exports to counter something that is now gone) will backfire when the market moves beyond that static moment in time.

You are exactly correct. I was enlightened to this fact by our FRiend Thackeray. The oil from Alberta is similar to what comes from Iran and Venezuela. The most efficient refiners for this type of crude are in LA and Texas. The pipeline would bring it to OK. That is why the alternative pipeline that has been proposed would go from Alberta west to the Pacific coast of BC. From here it would be loaded on super tanker and sold to the highest bidder. That could still be US refiners or others like China or Japan,etc. The closest refiners would still be in the US. However, we would be competing with other bidders. If the Keystone pipeline is built it makes us the winning bidder almost always because it lowers the cost of shipping it to these Texas refineries. Therefore, they can afford to pay more fob Alberta.

The light sweet crude from ND and Texas is causing a decrease in imports from producers like Nigeria that also make light sweet crude.

The oil business is all about getting the right hydrocarbons from reservoir to end-consumer. Do that more efficiently, and with less loss, and huge benefits can be achieved.

This includes getting the right types of crude oil to the right refineries. Some refineries are designed to process less-expensive, heavy, sour crude; others are designed to process more-expensive, light, sweet crude. Get the crude mix wrong, and you either waste the value of light, sweet crude in one refinery, or get less value-added from heavy, sour crude. Trade barriers interfere with optimization of petroleum logistics, and cost everybody involved.

Since the geology is given, the business is pretty much defined by extraction technology, processing technology, and logistics. The Keystone XL pipeline is a logistics facility that promises a huge benefit. Of course, idiotic politics interferes with all aspects of the business.

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