Why US will export oil for 1st time in decades

Three key Texas House members fought all year for lifting the ban: U.S. Reps.

Since then, most crude oil drilled here is not allowed on the worldwide market. In a bipartisan move not commonly seen in today’s polarized Congress, Senate Republicans agreed to provisions to help strengthen the renewable energy industry as well. In October, Pearce voted in favor for a bill that passed in the House of Representatives that would have lifted the ban. West Texas Intermediate crude in Oklahoma was as much as $27.88 a barrel cheaper than European Brent in 2011. “Now the market is too jumpy”, a trader who deals with USA oil exports said.

Oil prices are as low as they are because Saudi Arabia, which depends nearly entirely on foreign oil revenue, maintained production despite falling prices to establish market dominance in the Far East with oil importers such as China and Japan.

USA oil and gas producers are hailing the lifting of a 40-year-old ban on American oil exports as a lifeline at a time when their sector is being decimated by sliding prices and oversupply. Refiners in the USA are nearing capacity for refining light tight oil and there are not many major infrastructure upgrades planned that will, in the near-term, increase the capacity for refining light oil in the U.S.

Because of the way the provision is drafted, it is likely to benefit just a handful of independent refiners that can now deduct about 6 percent of qualified production activity income, said Curtis Beaulieu, a senior counsel and tax expert at Bracewell and Giuliani.

USA oil prices slipped under $35 per barrel Thursday: Front Month Nymex Crude for January delivery lost 57 cents per barrel, or 1.60% to $34.95. One of the larger potential buyers may be Venezuela, which needs lighter oils to mix with its heavier grades found offshore. Producers including ConocoPhillips and Continental Resources Inc. have lobbied for it, as the industry has slashed more than 100,000 jobs to cope with a global oil glut and the lowest prices in six years.

Nevertheless, supporters of the ban say lifting it encourages the world’s continuing dependence on fossil fuels at a time when it should be moving to more sustainable energy production.

Sen. Maria Cantwell, D-Wash., sent out a press release touting the package’s tax credits for wind and solar, but said nothing about the lift of the crude oil export ban.

While many Democrats found lifting the export ban a bitter pill, Ryan could not resist a little gloating. These might include extending wind and solar tax credits and reauthorizing the Land and Water Conservation Fund.

The existing rules allow US oil exports to Canada, and supplies from regions such as the Bakken shale in North Dakota have been shipped by rail to refineries in Eastern Canada. “When we are restricted from exporting (oil) in essence our competitors – like OPEC, Venezuela and Russian Federation – have an advantage on us”, Hoeven said. He refused to weigh in on inclusion of the oil export ban provision, which the White House has threatened to veto as a stand-alone measure. No doubt part of the reason that the differential has all but vanished is that the intentions of Congress were telegraphed to oil markets over the past few weeks, so the markets have already taken the move into account to a certain degree. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary.