Effect of Crude Exports | Russell T. Rudy Energy LLC
On the heels of the Arab Oil Embargo of 1973, the crude oil export ban seemed to make sense. With an acute oil shortage it seemed reasonable to keep as much at home as possible, when a great deal of our supply was dependent on Arab nations intent on punishing us for our support of Israel. However, as in many things in life, much can change in 40 years.
As “Rigzone” reports, U. S. refiners depend on a mix of crudes. While they can handle some light sweet crude, they are configured to process a blend which includes heavy sour crudes as well. With a worldwide crude glut, everyone is eager to sell their oil in the global market. Much of this glut, especially here is the U. S., is attributable to the shale revolution. Unfortunately, we are producing much more shale oil than domestic refineries can use. Consequently, our oil was selling at a roughly $5 per barrel discount to international prices.
In December, President Obama signed legislation lifting the crude export ban. Now our light, sweet, domestic crude can go to foreign refineries that are better suited to process it. In theory, this will benefit us oil producers. In practice, with oil selling one third of its price a year ago, the benefits are illusory, at least in the short term.
Sandy Fielden, an analyst at RBN Energy LLC, observes, “It looks like the lifting of crude oil export restrictions came too late to have much impact on U. S. production or prices in an era of free falling prices. In normal circumstances this imbalance of crude quality would have worked itself out in the international marketplace by U. S. producers selling shale crude to refineries overseas that could process lighter crudes and the (United States) continuing to import the heavier crudes (refineries) preferred.”
Ultimately, lifting the ban will result in a more efficient global market and hopefully help hard-pressed shale operators. However, it appears that some of them might not survive long enough to realize the benefits of crude exports.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/142277/Crude .
