Why The USA Should Export Crude: EIA Report

abarrelfullabarrelfull wrote on 18 Sep 2015 06:49

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I have something of an obsession with the ban on crude oil exports from the USA, both for ideological and practical reasons. A country that preaches the free market, should not indulge in such mercantile games. Moreover, I have never believed that the ban was good for the USA as a whole (though as with all such restrictions, there are beneficiaries, who tend to be very vocal in their support).

Now the EIA has published A Report examining the restriction and its impacts under a number of different scenarios.

They come to a number of conclusions, in line with what I have always thought:

  1. In cases where the Brent-WTI spread grows beyond $6/b–$8/b, removal of current restrictions on crude oil exports would result in higher wellhead prices for domestic producers, who would then respond with additional production.
  2. Petroleum product prices in the United States, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports.
  3. Refiner margins (measured as the spread between crude input costs and wholesale product prices), which tend to increase as the Brent-WTI spread widens, would be lower without current restrictions
  4. Unrestricted exports of U.S. crude oil would either leave global crude prices unchanged or result in a small price reduction

So only US Refiners would lose out. The report calculates that they need a WTI/Brent differential of about $15 per barrel to encourage investment. Given the cost of this differential to crude oil producers, and the impact on their investments, favouring refineries is inefficient.

So for everyone's sake, lets repeal the law and get US crude exports flowing.

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