Will the U.S. lift the oil export ban?
That's been the question on investors' minds recently as oil prices fall to new lows. WTI oil prices have cratered 8.1% in August already. The U.S. benchmark hovers at a six-year low of $42.42 as of Friday, Aug. 14.
Fears of a growing global supply glut have increased as some investment firms change their forecasts. Goldman Sachs Group Inc. (NYSE: GS) said in an Aug. 6 note that the global oil market is oversupplied by 2 million barrels a day. The bank estimates the price of oil to stay in the $45 range into October.
"The rebalancing of supply and demand will likely prove to be far more difficult than what was previously priced into the market," Goldman stated.
Here's why ending the decades-old oil export ban would lift crude oil prices...
What Would Happen If the U.S. Lifts the Oil Export Ban?
According to a study commissioned by the Consumers and Refiners United for Domestic Energy (CRUDE) Coalition, lifting the ban would boost global oil prices by $3. Repealing the export prohibition would increase both oil imports and the cost of all refined products, including gasoline, jet fuel, and heating oil.
But it would also hurt the already decimated oil job market. The study noted that ramping up oil exports will lower refinery utilization. That would lead to manpower reductions and possible refinery closures.
Congress is now considering lifting the U.S. oil export ban. The House of Representatives is likely to vote on the move as early as next month and pass it on to the Senate by early 2016.
Lifting the oil export ban could mark a milestone few people saw coming. After all, daily U.S. oil production has shot up more than 80% since 2008, reinforcing the fact that the United States is no longer the energy-dependent country it was for most of the 20th century.
"Go back seven years, you would not have imagined that there would be a debate about U.S. exporting oil," said Daniel Yergin, vice chairman of research firm IHS Inc. (NYSE: IHS), to The Wall Street Journal.
With the decision likely hitting Congress in September, energy investors are wondering: Will the U.S. lift the oil export ban?
Will the U.S. Lift the Oil Export Ban?
There's no clear indication yet whether or not Congress will lift export restrictions, but there's already a lot of momentum behind the move.
The most significant supporter of the repeal is Speaker of the House of Representatives John Boehner. He expressed how the ban is outdated now that U.S. oil production is booming and the country is energy independent.
"Until recently, our nation's energy policy was rooted in a scarcity mindset that went back to the 1970s," Boehner told Reuters. "But now America is experiencing an energy boom and our policy needs to follow suit."
Various oil companies also support the legislative push. The CEOs of Continental Resources Inc. (NYSE: CLR) and Pioneer Natural Resources (NYSE: PXD) argue that exports would drive more domestic oil production while also increasing global prices. David Porter, chairman of the energy watchdog council Railroad Commission of Texas, says lifting the export ban will have rippling effects across the country.
"Crude oil exports would spur new American energy production, foster economic growth, and provide direct benefits to rural America and our nation as a whole," Porter told The Houston Chronicle's energy news site "Fuel Fix."
Alex McGuire is an associate editor for Money Morning who writes about the energy industry. Follow him on Twitter at @AlexMcGuire92 for updates on the biggest oil and natural gas news.
Related Articles:
- The Houston Chronicle: Farmers Would Benefit from Crude Oil Exports, too, Oil Industry Leaders Tell House Agriculture Panel
- The Wall Street Journal: Move to Allow U.S. Oil Exports Accelerates
- Reuters: House Speaker Boehner Supports Ending U.S. Oil Export Ban