Crude prices are dropping, revisions of export laws regarding petroleum products are stagnant, coal is at the losing end of carbon emission regulation and key infrastructure projects such as the Keystone XL are on hold. This is the reality of the energy industry a little over a month from November elections.
Due to the exponential increase in oil production, America is taking more oil out of the ground than our limited pipelines and refineries can process. Operators in the Permian Basin have already run into issues with discounted oil due to lacking infrastructure. As the Houston Chronicle reports, the gap is widening between what crude costs on the international market, and what it costs at the trading hub in Cushing, Okla.
There are some very powerful political ideologies about to do battle in the lobbying sector of American politics. On one side, refiners would hate to lose their corner of the oil processing market if the nearly 40 year old oil export ban were suddenly lifted. In the same vein, what the Chronicle calls “Tea party politicians,” wish to hoard oil in a sort of xenophobic ethos. However, this alliance of anti-exporters could also include those who rally behind the belief of American energy independence.
On the other side of the lobbying contest, we have the petroleum producers themselves. Given the painful costs that go along with hydraulic fracturing and horizontal drilling, in addition to other expenses such as rig fees, transportation, various servicing to production sites and expanding to new opportunities within shale plays, companies are going to push for any opportunity that solidifies a proper economic return.
Media scare tactics are already being implemented. The Chronicle pointed out that an executive at Delta Airlines, which owns a refinery, anticipates that if U.S. crude exports were allowed then this would result in the closure of national refineries and the loss of American jobs.
Goldman Sachs Group Inc. (GS) has also supported keeping the current ban, at least until the U.S. market reaches a “saturation” point when domestic refining capacity can’t absorb increased oil production. Last June, Bloomberg ran an article where GS stated that maintaining the statutory curb on shipments overseas will deliver the “highest value” to the U.S. economy. In the same article, Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts warned that the “urgency of the debate has been premature,” and that “we aren’t at the saturation point and won’t be for a long time because there are a bunch of ways refiners are able to transform these molecules and make products for export.”
Whether the anti-export supporters can make this the most popular belief is still unknown. However, In July at the U.S. Energy Information Administration conference, oil market analysis Jamie Webster stated that lifting the ban could lead to an average of 394,000 additional US jobs over the 2016-2030 period, with highs of 811,000 additional jobs supported in 2017 and a peak of 964,000 jobs in 2018. The same study quoted by Webster also contained information that claimed the rising crude supply generated by lifting the ban would actually lower gas prices by an annual average of 8 cents per gallon. The combined savings for US motorists during the 2016-2030 period would translate to $265 billion compared to a situation where the restrictive trade policies remained in place.
Hopefully scholarly studies and science will guide political opinion on the matter of our current export ban regulations. Perhaps our laws just need tweaking rather than an all-or-nothing approach. But this is a six-trillion-dollar globalized industry. With so much money hanging in the balance, it’s likely the sounds of science will be hampered